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ACA Agonistes
Big Insurer Flees Obamacare

America’s biggest health insurance company can no longer afford the Affordable Care Act. The Fiscal Times reports:

The Affordable Care Act suffered another jolt late last week with the news that UnitedHealth Group, the nation’s largest health insurer, was making good on its threat to pull out of Obamacare, beginning with its operations in Georgia and Arkansas.

UnitedHealth roiled the market last November when it revealed that it was considering exiting Obamacare after incurring hundreds of millions of dollars in losses related to ACA business.

As the FT notes, UnitedHealth’s decision does not come as a surprise (we wrote about the company’s ACA woes last year), and—unless other big insurers follow suit—it doesn’t herald the imminent collapse of the law. But the fact that even major insurers like UnitedHealth are hemorrhaging cash on the Obamacare exchanges highlights the fact that for all the ACA’s technocratic tinkering, it did not and will not fix the fundamental problem facing the U.S. healthcare system: That it’s too expensive, and that costs are growing too quickly.

The architects of the ACA took aim at access, rather than affordability, achieving a coverage expansion mostly by putting more Americans on the Medicaid rolls. They left the underlying issues plaguing the healthcare system in place (and in many cases exacerbated them), so middle class families are still seeing a growing share of their paychecks consumed by rising premiums and deductibles. And they failed to realize that in the long run, affordability is access, and that attacking the factors that inflate the cost of healthcare in the private market should be a higher priority than expanding subsidies. The departure of UnitedHealth from the exchanges is a devastating illustration of Obamacare’s failure to bring down costs, and clear evidence that, no matter what the White House says, the debate over health reform isn’t going away.

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  • Jim__L

    Time for another chorus of the “I told you so” song?

    • f1b0nacc1

      I believe that the phrase ‘pearls before swine’ comes immediately to mind here….
      Remember, being a leftie means never having to say you’re sorry. They won’t acknowledge this, much ,less admit their mistakes.

      • seattleoutcast

        I’m sure they’ll blame it on “big corporations” or something.

        • f1b0nacc1

          Most of them (we have several excellent examples here) will simply deny that it is happening, or if it is, that it is relevant. Then they will blame big corporations or the GOP, then they will try the ‘squirrel!’ tactic of pointing to some unrelated issue. Happens every time.
          The fact we don’t hit them over the head with it every time they show their faces is why it keeps happening…they never pay a price, so they keep doing it.

          • Andrew Allison

            You mean like saying Libya was his biggest mistake to deflect attention from the much greater disaster in Syria?

          • f1b0nacc1

            Consider how much of a fiasco the rest of his foreign policy has been that he actually is forced to fess up about Libya…

          • Andrew Allison

            Misdirection.

        • Fat_Man

          And propose nationalizing them so that they can have a ‘single payer system”. Just like Trump wants.

          • Andrew Allison

            Here’s the problem which the knee-jerk opponents of single-payer insurance seem unable to grasp: private health insurance for all is a luxury which society as a whole simply cannot afford.The rest of the OECD nations have figured this out

          • qet

            No Andrew, the problem is a real one that does not disappear by calling those who recognize it “knee-jerk opponents.” There are two problems, actually. The primary one is the Social Security fallacy; you know, that social security taxes deducted from your paycheck are credited to your personal account with the government as some kind of IRA; that it is your money and will always be there waiting for you; that the government cannot touch it “by law.” This fallacy was necessary to sell the welfare program at the outset to a citizenry that still maintained a self-regard inconsistent with receipt of welfare. Everyone knows this, and has known it for decades. Yet still left-liberals (and the AARP) repeat the fallacy whenever anyone tries to point out the truth, which is that social security taxes are indistinguishable from general taxes, are used for general government purposes by substituting government debt obligations for the cash, and that social security is a welfare entitlement straight-up, a redistribution of income from lower to upper classes. In the area of health care, this fallacy appears in the continued use of the word “insurance” to describe the ACA in terms acceptable to a population that knows (even its supporters know this which is why they cling to the “insurance” characterization the most tightly) it is just another tax-supported welfare program. Whether the tax is paid to the government like social security or to de facto government agencies like insurance companies have long since become makes no difference to anything except the propaganda. And a comprehensive health care welfare program is no more affordable by the US than is the maintenance of the private insurance regime.

            The other problem is that “single-payer” means government-paid, and government-paid means government-managed and ultimately government-provided. Already this country’s health system is 70% down the road to NHS equivalence, as the large insurers and the large hospital corporations work hand-in-glove with the myriad of government regulatory agencies. It is an open question whether it is worth continuing to resist full frontal NHS nudity. But more and more Brits seem to think so, as they are trying to run back to that 70% line that our left is trying to run past. http://www.thetimes.co.uk/edition/comment/lets-abandon-our-broken-nhs-and-move-on-f35cr23ks

          • Andrew Allison

            The real problem is that knee-jerk reactionaries are incapable of staying on topic. FWIW, the so-called Social Security fallacy is not merely irrelevant but a figment of your imagination. Social Security taxes go to the Trust Fund and loans by the Trust Fund to the Treasury are senior debt. It’s true that longevity has made the current level of benefits unsustainable without changes, but the fact is that benefits will be reduced about 25% if no changes are made.
            To return to the subject, ACA is absolutely a (totally screwed-up and doomed to failure) insurance program. It’s screwed-up because if pre-existing conditions are covered, the risk pool has to be very large to make the premiums and deductibles affordable. In other words, the penalty for not participating has to be as much as the premiums for participating (which means, shock, horror, it’s all-in single payer)
            The issue (this is a recording) is very simple: do we wish to provide a minimal level of healthcare to most, if not all, legal residents. If the answer is yes, then single-payer insurance (Medicare for all) is the only affordable solution. If the answer is no, then health insurance(as opposed to Medicaid welfare) should not be subsidized by the taxpayer (note that this includes the deduction which employees receive for their health insurance payments.

    • Andrew Allison

      My version of I told you so: The problem in the risk pool, which is heavily skewed toward those needing immediate care; the solution is to throw everybody into the pool (single-payer insurance, NOT single-provider care). It’s the ONLY way to make health insurance (as opposed to care, which is a different subject altogether) affordable.

      • seattleoutcast

        Why is creating a monopoly a good idea? Leftists hate it in the business world, and for good reasons. Why is it suddenly “different” when done by the government?

        • Jacksonian_Libertarian

          Exactly, it’s the “Monopoly – Stupid!”. The Government Monopoly like all Monopolies even limited Monopolies like that enjoyed by UnitedHealth, all suffer from the same disease, the lack of the “Feedback of Competition”. It is the “Feedback of Competition” that provides both the Information and Motivation which forces continuous improvements in Quality, Service, and Price in free markets. This means that to improve the Quality, Service, and Price of Healthcare, each person must be both paying for his own Healthcare and/or Health Insurance, and choosing those products, only then will Healthcare improve.
          It is likely impossible to get rid of the Socialist Medicare/Medicaid program, but if everyone else is part of a free market, then the Quality, Service, and Price will improve and the program will be more affordable, effective, and less of a burden on the taxpayer.

          • Andrew Allison

            In this case the feedback of competition is not merely inapplicable, but counterproductive. The competition between private health insures is, as it should be, making money, not reducing costs.

        • Andrew Allison

          It’s not rocket science. Just as a monopolist can command a high price, in the public sphere it can and in the case of (e.g. Medicare) does command a low one. The fact is that the vast majority of providers are prepared to accept Medicare (not Medicaid) reimbursement, and if it were the only game in town the leverage would increase.
          Insurance is intrinsically rather simple: the premiums paid must be sufficient to pay the claims, the administrative overhead and, in the case of private insurance, profit. The big problems with private insurance are the the multi-million dollar salaries paid to the senior executives, the profit, and the needless duplication of the basic function of collecting premiums and paying claims. That’s why Medicare’s overhead is roughly one-quarter that of private insurance.
          Because the standard response to single-payer insurance is “Medicare FRAUD!” I’d like to reiterate that not only do private insurance companies take at least an additional 10% of the top of the vastly greater premiums paid, but the level of private insurance fraud is immensely greater. Consider, if you will, not just the unnecessary tests and procedures paid for by private insurance companies but the difference in the prices charged to the insurers.

  • Frank Natoli

    The architects of the ACA took aim at access, rather than affordability, achieving a coverage expansion mostly by putting more Americans on the Medicaid rolls.
    Baloney. For many years, I had an individual United Healthcare Oxford PPO plan, decent co-pays and decent deductibles and good network including NYC hospitals for NJ residents but premiums not cheap, especially considering how much fun it is for insurance companies, pre and post-ACA, to stick it to people in their 60s, and the first thing United Healthcare Oxford did upon ACA taking effect was cancel every individual PPO, forcing everyone into higher premium, higher co-pay, higher deductible, severely limited network EPO plans with zero out of network compensation. If the author’s assertion about Medicaid was true, there would be no reason for insurers to kill all PPO plans, which ACA permitted them to grandfather.
    The killer is pre-existing conditions and “free” maternity and “free” pediatrics, none of which is insurance. It’s a welfare grant courtesy of private premium payers.

    • Andrew Allison

      Whilst I share your disgust with ACA, I think it’s important to be clear about the results. Health insurance and Medicaid (a welfare program) are entirely different. ACA not only increased Medicaid rolls to the point where it will bankrupt states (41% of the population of California, for example, has taxpayer-paid Medi-Cal “health insurance”), but made health insurance unaffordable for both low-income families who don’t qualify (via the premiums and deductibles) and insurance companies.

      • Frank Natoli

        Yes, but, my understanding is that the Medicaid expansions were “optional” for the states. Kasich in Ohio embraced the expansion. Others did not. I’m sorry but I don’t understand how Medicaid expansion, assuming the state opted for it, affected insurance affordability for low-income families. In fact, one of the many devilish details of ACA is the premium subsidies for low or even middle income families, a back door welfare transfer. If ACA made health care affordable, why the need to subsidize the premiums?
        I must return to the issue of pre-existing conditions, which I insist is the poison pill intended to destroy private health insurance, and certainly what drove United Healthcare to leave ACA [to the extent that any entity can “leave”]. Regardless of the unconstitutionality of federal taxpayer support of individual health care, mandating private companies to “insure” individuals who are guaranteed to immediately draw benefits far in excess of premiums is not “insurance”. The law might have implemented something akin to automotive “assigned risk” category, with federal taxpayer subsidy of that category, but having private health insurance companies and thus private health insurance subscribers pay that subsidy via premium surcharges is absurd, clearly intended to mask the “assigned risk” costs. It’s not working, is it?

        • Andrew Allison

          We’re talking past each other.
          Medicaid is NOT health insurance but welfare, and many beneficiaries can’t find treatment due to low reimbursement.
          Many low- and-middle income families who don’t qualify for Medicare cannot afford heath insurance (and many of those who, thanks to taxpayer subsidies, can) can’t afford treatment due to huge deductibles.
          Pre-existing conditions, broadly defined to include people who sign up because they expect to need treatment) is, of course, the reason premiums are so high that they had to be subsidized for ACA to come close to achieving its (misguided) goals.
          In short, we are in violent agreement that ACA is a total crock. Where I think we differ is in what to do instead.

  • WigWag

    Via Meadia is right; cost reduction is the key. The best way to reduce costs is to dramatically cut compensation to physicians. Lower physician compensation by 40 percent and a significant part of the problem is solved. There’s ample precedent for this; just ask airline pilots (who are every bit as skilled as physicians) what’s happened to their compensation in the past three decades. All journalists the same question. Ask the same question to lawyers. The best way to reduce physician compensation is to destroy the guild system that supports them. Dramatically increase in the number of practicing physicians by requiring medical schools to significantly increase the number of students they admit. Supplement this by allowing many more foreign physicians to practice in the United States.

    There is no way to reduce medical costs to the degree necessary without having physician compensation plunge.

    Figure out how to do that and a big piece of the problem is solved.

    • Tom

      It should be noted here that, at least in the case of academia, a lot of the problem isn’t the professors–it’s the administrators and their multiplication. If your administrator/student ratio is lower than your professor/student ratio, you have a problem. (This leaves out the question of adjuncts…)

      • WigWag

        I completely agree. The administrative bloat in the higher education sector is horrific. But that doesn’t mean professors aren’t overpaid. Few professors at America’s most respected four year colleges and universities teach more than two classes per semester. That translates into about six hours a week of actually standing in front of students and teaching. Often, tenured faculty teach only one course or even none. Many college and universities cover for the fact that their tenured faculty don’t actually do anything worthwhile by having graduate students or underpaid adjuncts do most of the teaching.

        It’s important to remember that as often as not, professors teach the same course year after year. Many could actually teach those courses in their sleep they’ve done it so many times. A final factor is the proliferation of professors who teach garbage courses in subjects that don’t matter like various ethnic, racial, and gender studies courses. Eliminate the professors who specialize in stoking the grievance mentality of young people and universities could dramatically reduce their costs. Supposedly, when professors aren’t involved in pedagogy, they’re busy as beavers with their research. The problem is that outside of the sciences, most of that research is little more than crap.

        While it is critical to significantly reduce physician compensation, at least most physician work hard. Professors, on the other hand, are mostly lazy, good for nothing loud-mouths who contribute a lot to the rising costs of higher education but little to producing educated students.

      • f1b0nacc1

        Leaving out the question of adjuncts is quite similar to “Aside from that Mrs Lincoln, how was the play?”

    • f1b0nacc1

      I agree with you, but who gets to bell the cat? The physicians, who have an exceptionally powerful lobby, will fight this till the last dog dies, as they have very little to lose. The bureaucrats are even more powerful, and they aren’t going anywhere anytime soon. Short of outright price controls (and how would you make that happen?) how does this play itself out.
      Tom draws the parallel to academe, and while I agree with him (and I see you do too), I don’t see any way out of THAT mess without total collapse….

    • Andrew Allison

      I beg to differ. First, let’s recognize that the fraud which everybody likes to talk about is perpetrated by healthcare providers ,not insurance companies. There are two primary causes of this; the first is that dishonesty is an equal opportunity vice, the second that reimbursement is too low. Let me give a couple of examples of provider fraud. I have a condition for which the recommend diagnostic procedure interval is three years, but my provider sends me a notification every year that he really cares and it’s time for one. Similarly, my wife gets annual “time for a mammo” notices from the local breast cancer center that are completely out of line with the recommendations. Meanwhile, my GP wants an office visit to write a lab slip for a necessary annual blood test and another one to discus the uncomplicated results. All of this is fraud. The question is, are they doing it to stay in business because they’re reimbursements are insufficient, or are they crooks. I prefer to think it’s the former.

  • DragonTat2

    So, United’s Hemsley took home $66 Million in 2014. ( http://www.ibtimes.com/unitedhealth-group-mulls-losses-blames-obamacare-ceo-stephen-hemsley-took-home-66m-2194436 ) How many more 10s of millions goes to CEOs & their exec buddies? Why do we need them, exactly? They’re nothing more than middlemen. (Even Bill Clinton said we waste upwards of $200 Billion a year in administrative costs alone. https://theintercept.com/2016/01/25/watch-bill-clinton-defend-bernie-sanderss-health-care-plan-in-2009/ )

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