Aetna announced this week how it’s drastically scaling back participation in Obamacare – just like big insurers Humana and United Health have done. Aetna’s reasons are the usual ones: not enough healthy people signing up, not enough subsidies, and not able to raise rates to cover their losses. Aetna, Humana, United Health and others have made a sound economic decision that Obamacare is not a right fit for their firms. What puzzles me is how they couldn’t, or wouldn’t, see this train wreck coming from the beginning.
One thing all insurers do is to hire actuaries and statisticians. Their job is to crunch numbers in order to quantify the insurer’s risk – predict the future – if it engages in something such as Obamacare. What did the number nerds miss?
Perhaps they missed seeing a very large pool of chronically ill people who lack healthcare. More specifically, these are people who were denied Medicare or Medicaid disability benefits. For example, many lower-skilled/lower educated people over age 50 exited the workforce during the Great Recession – and opted for disability benefits, including Medicare and Medicaid, as an early-retirement alternative. But not all of them were awarded benefits.
Being denied disability benefits doesn’t mean the worker has no need of health care; it means the Social Security Administration decided the worker was either not disabled, or not disabled enough to obtain a job in the national economy commensurate with the worker’s education and skills. Common sense indicates the ‘not disabled enough’ group would enter the Obamacare system first (and crash the HHS website), with more cohorts entering annually.
One might think examining the ‘not disabled enough’ group plus calculating possible growth scenarios is just the type of task that actuaries and statisticians crave. Or were they told by upper management not to look at the negative scenarios, to show the firm’s solidarity with President Obama’s plan?
Or did the insurers anticipate the negative scenarios and decide to take their chances with a game of chicken with state insurance commissioners – where the insurer threatens to pull out of a market if the commissioner hesitates in allowing premium hikes?
Today, in August 2016, the games of chicken are over, and anything overlooked (intentionally or not) by the number nerds has passed into history.
What remains is a broken and shrinking healthcare system.
Further, I think the Republicans’ chances of ‘repeal and replace’ are slim. ‘Repeal and replace’ works as a sound bite, but not as a policy solution. To bring about ‘repeal and replace’ Republicans would need to have the White House, plus hefty majorities in the Senate and the House. The Vegas odds on that happening would be very, very long.
The ‘known unknown’ is whether the House and Senate can compromise on an Obamacare fix that would make convince younger people that the benefits of purchasing healthcare insurance justifies the cost.
A House-Senate solution would be hard for a President of either party to reject, although rejection is a negative scenario too.
To reach a compromise, House Speaker Paul Ryan would have to give up his love for vouchers that shrink, while Senate Democrats and some Republicans would have to admit, for example, how a ‘free’ mammogram requirement forces women in their twenties to pay for a procedure they don’t need or use and inflates premiums.
Hillary Clinton said ‘it takes a village to raise a child.’ When it comes to legislating, it usually takes a train wreck to get the House and Senate to the negotiating table. Aetna’s slip-sliding away is a huge indicator that Obamacare is heading for a train wreck. And nobody needs an actuary, statistician or any other sort of number nerd to see this one coming.
Joanne Butler is a former staffer at the United States House Committee on Ways and Means. You can email her at email@example.com.