Aetna, the health insurer, announced this week that it is quitting 11 of the 15 states where it has been participating in Obamacare exchanges.
This means customers will have fewer options in 536 of the 778 counties where the insurer had been selling its services. In at least one county in Arizona, there may be no insurance plans available at all. Reduced competition will add upward pressure to premiums, which have risen continuously since Obamacare began.
Unpleasant though dwindling choice and skyrocketing prices in particular areas are, however, they should not distract attention from the deeper issue of Obamacare's wider failure. Aetna's pragmatic decision, taken after losing $200 million in a single financial quarter, is not an isolated development.
UnitedHealth, the nation's largest insurer, announced in April it was abandoning state Obamacare exchanges after losing $475 million on them in one year. Humana, for the same reasons, announced last month it is dropping "substantially all" Obamacare business after $1 billion in losses. Like Aetna, which had more than 800,000 Obamacare customers in June, these insurers found that the exchanges attracted customers older, sicker, and more expensive than they expected.
These companies entered Obamacare with high hopes of profit. But the truth, which some of us shouted from the rooftops before Democrats rammed Obamacare through Congress, is that if America's largest companies can't make money selling insurance on the exchanges despite government subsidies and a mandate forcing people to buy their product, no one can.
Certainly it cannot be done by the vaunted and heavily subsidized state co-ops. Already, 16 out of 23 of them have gone belly-up after swallowing $1.7 billion of taxpayer money. This means that without big price hikes in premiums (which are coming and will hit consumers and taxpayers alike) there is no known way of participating that can work in the long run, with the possible exception of niche markets such as concierge care.
The problem with Obamacare's complex and over-regulated exchanges is precisely what its critics predicted. The most expensive and sickest patients sign up and begin consuming lots of costly healthcare when it is offered below cost. By forcing insurers within Obamacare to offer insurance without allowing them to base their prices on the level of risk, Obamacare's drafters guaranteed a stampede of sick and expensive enrollees without a corresponding bump in enrollments by healthy payers.
Good healthcare is expensive, more expensive now than it was before Obamacare. So the only way insurers can stay in the business is either to jack up premiums or skimp on quality, by reducing patent choice among doctors, for example. This makes health insurance less attractive to people who don't need it immediately or regularly. So such people don't buy it and the problem gets worse. The system accelerates into a death spiral.
The law's defenders brag that Obamacare has cut the proportion of the population who lack insurance. But nearly all the gains are the result merely of Medicaid expansion. If Medicare expansion had been enacted alone, it might have been a popular success.
The Obamacare exchanges, in contrast, have done no good and much damage, destroying the individual market for health insurance. Sure, more people are insured on paper, but those who had plans they liked are now stuck with coverage that costs more and which, once deductibles are taken into account, cover less than they used to. So Obamacare obliged America to pay more for less.
As more insurers pull the plug on this malformed federal scheme, Democrats need to be held accountable for the disaster they have wrought. They forced Obamacare down the nation's throat, and it's time for the lawmakers responsible to swallow the bitter medicine for their failure and incompetence. This November's election would be the most appropriate time for them to do so.