Louisiana insurer: As designed and administered, Obamacare 'simply does not work'

Insurers selling Obamacare plans in Louisiana have requested rate hikes as high as 30 percent for next year. More significantly, the state’s largest insurer is saying that, as designed and currently administered, Obamacare “simply does not work.” The Times-Picayune reports:

Blue Cross Blue Shield of Louisiana, the state’s largest insurer, wants to raise rates between 20.5 percent and 28.3 percent on average for several individual plans. The changes would affect more than 134,000 people.

Spokesman John Maginnis said fundamental flaws in the Affordable Care Act are to blame. The law does not do enough to get healthy people to sign up, and rules on when people can enroll for coverage are lax, he said.

“The way the law was designed and is now being administered simply does not work,” Maginnis said.

Part of what Maginnis is talking about is the decision to make the so-called risk corridors program budget neutral. Risk corridors was intended as a kind of insurance policy for insurers who were not familiar with the new market. Those who earned more than expected paid into a pool so that those who had losses could recoup those losses from the pool. But in 2014 the money paid in was only about 12% of what was requested from insurers on the losing end. And because the program was made budget neutral by Republicans seeking to avoid an insurance company bailout, many insurers were stuck with those losses. But the risk corridor money only accounts for about half of Lousiana BCBS’s expected losses in the Obamacare exchange:

Blue Cross Blue Shield estimates its Obamacare plans in Louisiana will lose more than $200 million by the end of this year. Maginnis said roughly half of those losses are the result of low payments from a federal program meant to protect insurers from heavy losses in the early years of the Affordable Care Act.

Earlier this year the country’s largest insurer, United Health, announced it was pulling out of most exchanges next year. Most progressives took a look-at-the-bright-side approach to the news, noting that most other major insurers were committed sticking it out. Blue Cross Blue Shield of Louisiana is still planning to stick with Obamacare but there is no mistaking that the tone has become a bit bearish:

Maginnis said Blue Cross Blue Shield wants to remain in the federal insurance marketplaces, but it cannot continue to prop up plans that lose money. It’s “simply not sustainable,” he said.

“We’re in business to create a margin that’s large enough to keep us operating,” he said.

The Times-Picayune published this graphic showing some of the higher rate requests filed with the Louisiana Department of Insurance. Note that these requests still have to be reviewed and approved. Also, requests for rate increases under 10% will not be published until November.