Another Insurer Bites the Obamacare Dust

Late Monday evening, health insurer Aetna confirmed a major pullback from Obamacare’s exchanges for 2017. The carrier, which this spring said it was looking to increase its Obamacare involvement, instead decided to participate in only four state marketplaces next year, down from 15 in 2016. Aetna will offer plans in a total of 242 counties next year — less than one-third its current 778.

Coupled with earlier decisions by major insurers Humana and UnitedHealthGroup to reduce their exchange involvement, Aetna’s move has major political and policy implications:

Exchanges are in intensive care
Insurers have lost literally billions selling Obamacare policies since 2014. One estimate found that insurers suffered $4 billion in losses in 2014; other studies that suggest carriers lost the same amount last year as well. And these multi-billion-dollar losses come after taking into account two transitional programs that have used federal dollars to protect insurers — programs that will end this December 31.

Over the weekend, in a report on premium increases for 2017, the New York Times noted that for one Pennsylvania health plan, nearly 250 individuals incurred health-care costs of over $100,000 each — “and then cancelled coverage before the end of the year.” While the administration has proposed some minor tweaks to minimize gaming the system, they will not solve the underlying problem: It takes tens of thousands of healthy enrollees to even out the health costs of 250 individuals with six-figure medical expenses, and Obamacare plans have failed to attract enough healthy individuals.

An opening for Trump?
The Wall Street Journal noted that the Aetna’s pullback means that some areas in Arizona now have no health insurers offering exchange coverage. Individuals there who qualify for insurance subsidies will have nowhere to spend them.

President Obama faced a self-imposed crisis in the fall of 2013 when millions of Americans faced a double whammy: Cancellation of their pre-Obamacare policies was coupled with much higher premiums for exchange coverage to replace it. Hillary Clinton could face an eerily similar dynamic in the weeks just before November 8. It remains to be seen whether Donald Trump’s campaign can capitalize on this potential October surprise hiding in plain sight.

Hillary has a problem
Over and above the obvious political problem that the exchanges present between now and November, their dire situation poses a policy quandary that a potential President Clinton would have to address — and fast — on taking office. Her campaign has proposed increasing federal subsidies for those affected by high out-of-pocket costs. But subsidies to individuals will matter little if insurers will not participate in exchanges to begin with.

So how would Hillary Clinton solve the exchange problem? Would she endorse a bailout of the insurers that liberals love to hate? Conversely, if Republicans retain control of at least one house of Congress, how on earth could she enact a government-run health plan that Barack Obama could not pass with huge, filibuster-proof majorities in both chambers? How would a President Clinton get out of the box that her predecessor has gift-wrapped for her?

Will conservatives stand fast?
As I previously noted, Aetna’s “solution” to the exchange problem is simple: Place taxpayers on the hook for their losses — in short, a permanent taxpayer bailout. But given the billions of dollars that insurers have already lost even after receiving tens of billions in corporate welfare from the federal government, Congress will, we should hope, exercise the good judgement not to throw good money after bad.

No Republican voted for Obamacare in either the House or the Senate — and for good reason. The poor design of its health-insurance offerings has ensured that only very sick individuals, or those qualifying for the richest subsidies, have signed up in any significant numbers. No small legislative changes or regulatory tweaks will change that fundamental dynamic. The question is whether, having seen their predictions proven correct, Republicans will seize defeat from the jaws of victory and view a Hillary Clinton victory as meaning they need to “come to terms” with a law that has destabilized insurance markets across the country. Here’s hoping that sale proves as elusive for Mrs. Clinton as Obamacare itself has been to insurers.

This post was originally published at National Review.