Excerpt from Real Clear Politics:
Economic reality is making it increasingly obvious that we are in the midst of Obamacare’s long anticipated death spiral. Most recently, Aetna joined UnitedHealthcare and Humana as the third of the “big five” insurance firms to announce major cuts to its Obamacare exchange business.
For insurers, it’s simple math: Premiums collected must exceed claims paid. If too few healthy, low risk individuals enroll to offset the costs of insuring unhealthy, high risk individuals, the math doesn’t work. This imbalance forces insurers to raise premiums on the low risk individuals who do enroll to cover the costs of insuring high risk individuals. The rising premiums cause even more healthy individuals to drop coverage – resulting in what has been called a death spiral.
Aetna’s CEO Mark Bertolini explainedthat his company was dropping out of the exchanges because “[p]roviding affordable, high-quality healthcare options to consumers is not possible without a balanced risk pool,” and that “individuals in need of high-cost care represent” a percentage of the risk pool so large that it “results in substantial upward pressure on premiums and creates significant sustainability concerns.”
The result: Aetna suffered a second-quarter pretax 2016 loss of $200 million and total pretax losses of more than $430 million since January 2014 when the exchanges opened for business. Aetna wasn’t alone.
In April, the nation’s largest health insurer UnitedHealthcare, announced that it was pulling out of nearly all ObamaCare exchanges. In 2017, it will participate in only three exchanges instead of the 34 this year. CEO Stephen Hemsley similarlyexplained that “[t]he smaller overall market size and shorter-term higher risk profile within this market segment continue to suggest we cannot broadly serve it on an effective and sustained basis.”
Read more at Real Clear Politics.
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