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Obamacare Is Quickly Unraveling (And The Reason Is Quite Simple)

Obamacare Is Unraveling (And The Reason Is Quite Simple)

WASHINGTON — A critical component of Obamacare is in danger of collapsing as insurance companies pull out of the system due to huge financial losses.

UnitedHealth is pulling out of the exchanges because it lost $475 million in the exchanges in 2015 and may lose as much as $500 million in them this year, CNN Money reported. About 795,000 people were covered under UnitedHealth policies in the exchange.

The reason they are losing money is simple: There are not enough young people in the system. The theory behind Obamcare was that a large pool of healthy young people would buy policies, thereby allowing insurance companies to pay for health care for older people who actually do get sick and visit the doctor often.

Insurance companies need about 35 percent of their customers to be between the ages of 18 and 34. As of now, it is 28 percent, Politico reported. Young adults who refuse to purchase insurance face a penalty, but many of them are finding it cheaper to pay the penalty than buy insurance.

Another reason why younger people are not participating is that large numbers of employers did not stop offering health care to workers as expected. Instead, most people stayed on employer plans, and only a small number of less healthy individuals bought policies through the exchanges.

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“We have two years of data and everybody who’s in the individual market on average is not as healthy as we were led to believe,” Alan Murray, CEO of New York-based CareConnect, told Politico.

UnitedHealth is far from alone. Seventy percent of insurance companies offering Obamacare exchange policies lost money on them in 2014, the McKinsey consulting firm reported. McKinsey estimated that insurers lost $2.7 billion on the exchanges in 2014.

This summer alone, two major insurance companies – Aetna and Anthem – announced they would not expand in the marketplace due to financial losses, The Hill reported. All total, the five largest insurance companies say they are losing money through Obamacare.

“From a policy point of view, we’re basically seeing the exchanges unravel,” health care strategist Michael Abrams told The Hill.

Abrams’ clients include UnitedHealth.

Elsewhere, Blue Cross Blue Shield of North Carolina lost $400 million on Obamacare in 2014 and 2015, Politico reported.

The average price of an Obamacare exchange plan is expected to increase by 19.2 percent across the nation next year. Increases in some states will be much higher; the cost of exchange plans in Arizona, Oklahoma and Tennessee is expected to increase by 50 percent in 2017.

“The more competition you have, the better the pricing,” Mario Molina, CEO of Molina Healthcare, told Politico. “In some markets where there’s very little competition it’s difficult to get the prices that health plans need.”

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