Saw that comin’…

In the latest “Death Blow” to the Patient Protection and Affordable Care Act, UnitedHealth is warning that it might be forced to pull out of Obamacare:

The biggest U.S. health insurer is considering pulling out of Obamacare as it loses hundreds of millions of dollars on the program, casting a pall over President Barack Obama’s signature domestic policy achievement.

UnitedHealth Group Inc. has scaled back marketing efforts for plans sold to individuals this year and may quit the business entirely in 2017. It’s an abrupt shift from October, when the health insurer said it was planning to sell coverage through the Affordable Care Act in 11 more states next year, bringing its total to 34. The company also cut its 2015 earnings forecast.

UnitedHealth Group is the largest insurer in the United States.  And if they are having financial problems, then the rest of them are probably going broke also.  Gee, I wonder why that might happen.  The answer is right out of Economics 101.

While millions of Americans have gained coverage under Obamacare since new government-run marketplaces for the plans opened in late 2013, in UnitedHealth’s case they haven’t been the most profitable. Customers the company has added have tended to use more medical care. UnitedHealth also said today that some people are signing up for coverage, getting care and then dropping their policies.

“We cannot sustain these losses,” Chief Executive Officer Stephen Hemsley told analysts on a conference call. “We can’t really subsidize a marketplace that doesn’t appear at the moment to be sustaining itself.”

***

UnitedHealth said it expects as much as $500 million in losses on the Obamacare plans in 2016. The insurer will record $275 million of the costs in the fourth quarter. United also said Thursday it’s booking $350 million in losses tied to the 2015 performance of its ACA plans.

I will add that UnitedHealth isn’t the only insurer having problems.  Humana allowed illegal immigrants to obtain insurance.  Humana doesn’t know how much it paid out in claims, though it is entirely possible that these illegals got their health care paid for:

A lot of undocumented immigrants got federally subsidized health insurance through Louisville-based Humana Inc. this year, but they didn’t keep it for long.

***

The terminated policies weren’t isolated to Humana — all told, about 423,000 people “failed to produce sufficient documentation on their citizenship or immigration status,” according to a September report from the White House cited by Forbes.

Because the system gives the newly insured three months to submit missing documentation, “it’s unclear whether the government actually paid any claims for undocumented immigrants for any period of time,” according to the Forbes story.

(My comment: WHY THE HELL ARE THESE PEOPLE GETTING INSURANCE ANYWAY?)

This is what economists call the Law of Unintended Consequences.  These health insurance companies thought that they would be make a ton of profits by forcing all Americans to buy insurance with high deductibles.  Unfortunately, they didn’t realize that they would lose money because subsidies made insurance more “affordable”, so more unhealthy people signed up even if they previously couldn’t afford it; and they were providing incentives for people to go use more health care services.  Add to this the fact that people can no longer be denied health care due to to pre-existing conditions, and viola!  People sign up for insurance, use it until they are better, then drop it.  The end result is that the healthy people who didn’t need health insurance before are now forced to subsidize the health care demands of unhealthy people.*

And since they’re paying for it anyway, now healthy people are using more health care services also.  This is what happens any time you subsidize something: you get more of it.  In this care, using health care services is being subsidized by FedGov through the expansion of Medicare and direct subsidies through Obamacare.

The entire Patient Protection and Affordable Care Act is a farce.  It is bankrupting insurance companies, and it won’t be too many more years before Obamacare and the health insurance companies collapse entirely.  As lobbyists for the health care insurance industry wrote the bill, it is quite ironic (and fitting) that the law is killing them.

I say, good riddance!

I couldn’t find a clip of Jayne Cobb saying the title line by itself, so you will have to suffer through most of this video to see the relevant one.

  • Fun Fact: one of my associates told me last year that his wife was getting her tubes tied, and it wasn’t going to cost him a cent.  This is the type of crap that people are using their insurance for.  And that’s yet another reason why the health care system in the U.S. is so screwed up.  Tubal litigation is an elective surgery, just like an abortion.  Yet both of those medical procedures are covered by Obamacare, while alternative medicines and preventative care aren’t covered.

Update: dammit, how could I not have realized this?  Obama (i.e., you the taxpayers) is going to bail out the health insurers:

In the wake of rising costs for health insurance in the ObamaCare market, consumers are simply opting out, and this is taking its toll on ObamaCare’s viability not only for consumers but for health insurers.  So much so that United Health, one of the nation’s largest health insurers, acknowledged this week that it is considering leaving the ObamaCare market.

The Obama administration responded by “quietly” promising to bail out health insurers in yet another attempt to save his clearly ineffective and flailing signature law.

***

The moneys used to bail out the insurance industry are supposed to come from money paid in by ObamaCare users; however, there is not enough money to cover losses.

***

In an effort to reassure the industry, CMS, the HHS agency Tavenner previously led, issued guidance reiterating that HHS would use money collected from insurers in 2015 and possibly 2016 to make up the $2.5 billion shortfall that exists in 2014.

But what happens if there still isn’t enough money, and after 2016, the program is taking in less than the money sought by insurers?

HHS said it, would “explore other sources of funding for risk corridors payments, subject to the availability of appropriations. This includes working with Congress on the necessary funding for outstanding risk corridors payments.”

Good lord, it just keeps getting worse…

 

 

 

 

 

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Categories: Econ 101, Economic Illiteracy, Government Shenanigans, Healthcare, Obamacare, Oops, Stupid People, Thinking like an economist

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