ObamaCare advocates: Repeal might cause collapse of individual-plan markets, you know
posted at 4:41 pm on November 21, 2016 by Ed Morrissey
Of all the dire warnings about Republican governance, this might be the worst case of projection yet. As the GOP plans to offer a repeal of ObamaCare and will get Donald Trump’s signature after January 20th to make it stick, its defenders have begun to warn that such a move will drive insurers out of the individual-plan markets. Apparently they’ve missed the exodus already under way. Politico’s Adam Cancryn and Paul Demko send up the warning flare:
Republicans warned for years that Obamacare would blow up the nation’s individual insurance market. Instead, their own rush to repeal the health care law may be what triggers that death spiral. …
But repealing the law without a replacement is likely to spook health insurers, who might bolt from the markets prematurely to avoid losses as some people stop paying their premiums, while others rush to have expensive medical procedures before losing coverage. Insurers would have little incentive to stick around without knowing know what to expect at the end of the transition. And that could spell chaos for consumers.
Ahem. That death spiral has already begun, and it’s gaining speed. Major insurers such as United Healthcare, Humana, and Blue Cross Blue Shield have already pulled out of markets, with Aetna not far behind. According to a Kaiser Family Foundation study, the number of consumers with only one insurer option went from 2% in 2016 to 19% in 2017. That includes 15% of all urban-center ObamaCare consumers, and not just the rural areas, but the news is bad there too. More than a third of all US counties will have two or fewer insurers willing to offer plans at all.
Ask Minnesotans about the “death spiral” already under way. The state had to agree to rationing of insurance policies just to keep insurers in the exchange at all — and to astronomical premium and deductible increases to boot. I wrote about it in October:
In order to keep insurers from fleeing the Mnsure ObamaCare exchange, Commerce Commissioner Mark Rothman and Governor Mark Dayton had to agree to massive rate increases across the board, which have garnered most of the headlines and discussion in this state and around the nation. Another less-discussed concession, though, might have even worse portents for the unaffordable Affordable Care Act. Rothman and Dayton have allowed insurers to cap enrollments in order to limit their losses — an act of rationing that may set precedent for negotiations in other states. …
Minnesotans will pay more and get less — and that’s if they’re lucky enough to have a choice in plans. Thanks to rationing, tens of thousands of Minnesotans will have the Hobson’s choice of Blue Plus or nothing at all, and an IRS fine to boot.
Be sure to read that whole post. The state has willingly trapped ObamaCare consumers between a federal mandate to buy insurance and a game of musical chairs to find it. That’s the only way that Minnesota could keep their ACA exchange open at all, and don’t expect that to last longer than 2017, even with the huge jump in premiums. That rationing combined with the astronomical price increases in Minnesota demonstrate the clear signs of the death spiral already under way as well:
As the Star Tribune notes, all seven of the remaining insurers in the state had threatened to follow Preferred One out the door without the massive rate hikes. Even with Rothman surrendering to the realities of centrally controlled economies, Blue Cross Blue Shield will still exit Mnsure at the end of 2016. The massive price hikes, Rothman said in September, were “a stopgap for 2017.” Foreshadowing Dayton’s announcement on Wednesday, Rothman added, “It’s an emergency situation – we worked hard and avoided a collapse.” …
The reason for that instability is that higher prices are disincentivizing healthier consumers from buying expensive comprehensive insurance policies as they opt instead to pay out of pocket for their minimal utilization and pay the tax penalty for non-coverage instead. Thanks to skyrocketing premiums and deductible thresholds, the likelihood of many consumers to have benefits applied to anything but a basic wellness check is remote at best, which makes the risk worthwhile.
As prices go up, the risk for healthier consumers gets lower and lower, which means more of them will opt out rather than pay thousands of dollars every year for benefits they never use. As that continues, utilization rates for the sicker and older consumers who have incentives to stay in the system continue to escalate, necessitating even higher premiums. Eventually, the system exhausts itself and collapses. That “death spiral,” long predicted by Obamacare critics, would have arrived in Minnesota now except for the approval of astoundingly high premium hikes – an event that political realities will almost certainly keep from being repeated.
In four short years, ObamaCare has blown up the individual markets and driven insurers out of them (and providers, too). Those remaining in them in 2017 had already warned before the election that they wouldn’t stick around much longer than that, either. Claiming that repeal would create a death spiral that has been forming for the past four years sounds less like ignorance and more like an attempt to create a blame-shifting narrative that lets ObamaCare advocates off the hook for their own massive — and utterly predictable — failure at running a command economy. Perhaps we’re seeing a credibility death spiral at the same time.