After reporting a $200 million loss tied to the Affordable Care Act, Aetna (AET) became the latest of the nation’s largest insurers to declare a severe cut back on its exchange business. This follows similar moves by UnitedHealth (UNH) and Humana (HUM), both companies also citing the financial burden of Obamacare.
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More than one-third of Americans will have but one insurer to choose from in 2017, according to healthcare consulting firm Avalere. While premiums skyrocket, there will be no competition or “price shopping” for cash-strapped customers.
Senator John McCain (R-AZ) is seeking re-election for a 6th term, in a state where Blue Cross Blue Shield is pursuing a rate increase of more than 51%. To Senator McCain, the answer is obvious; Obamacare is unraveling. He tells FOXBusiness.com “the whole thing is collapsing like a house of cards.”
But are rising premiums a sign of imminent collapse for the exchanges? Not according to Ezekiel “Zeke” Emanuel, White House Special Adviser on health policy from 2009-2011, who had a hand in crafting the Affordable Care Act. “When you introduce a new product like the exchanges and the insurance, you have a very difficult time pricing it because you don’t know who’s going to come to the show. So one of the things we have is a correction, which I think will be a one time correction trying to fix the original pricing,” he tells FOXBusiness.com.
Not only is McCain’s home state expecting one of the most significant surges in premium prices next year, Arizona is also home to Pinal County, the first county in the U.S. where there will be zero insurers covering consumers on the Obamacare marketplace. Though concerned for his constituents, McCain is not surprised the country’s major insurers are dropping out of the exchanges like flies. “No private enterprise system can stay in business losing hundreds of millions of dollars a year…. Those that designed the law never provided for this eventuality because they never believed that it would happen,” he says.
In 2017, Aetna is expected to offer plans on exchanges in only four states, Humana in 11 or less, and UnitedHealth in 12.
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Even one of the bill’s architects won’t deny the exchanges are deteriorating: “I think we clearly need to work with, and find out what would be helpful to, insurers. Exchanges don’t naturally work. How do we know that? We’ve had exchanges before… They often do collapse if you get adverse selection in them… And, let’s face it, we’ve got to get more people enrolled,” Emanuel says.
As of March 2016, only 11.1 million people were enrolled in the exchanges, well below the Congressional Budget Office’s initial estimate of 21 million.
The difficulty precluding solutions to these problems is the deep-rooted partisanship that has beleaguered the law since inception.
As a sitting member of the Senate during the passage of the Affordable Care Act, McCain’s memory of the vote is not a fond one: “It’s the first entitlement program ever passed on a strictly party-line basis. There were no amendments allowed to be voted on... It was a 60 vote majority in the Senate, overwhelming majority in the House, and they just rode roughshod over the Republicans.” With a filibuster-proof majority of 60 in the Senate, the Democrats didn’t need one Republican Senator to approve the bill. And they didn’t get one.
“It was a total failure to outreach to any Republicans... Frankly, it was arrogance,” McCain laments.
Like many others on his side of the aisle, McCain is in favor of scrapping the health care bill altogether. “Ideally I’d like to go back to square one. Provide for a free market, capitalistic approach to it.” He proposes risk pools, interstate policy availability, improving the way generic drugs are put on the market, expanding the reach of community health centers and giving people the choice to opt out of health care altogether, as potential policy solutions.
Emanuel doesn’t view scrapping the bill as an option. “We need to work within the framework we have here. This idea of replacing makes sense only if you’ve got a replacement, there’s no replacement here… And we’re not going to get a replacement by the way. I don’t think there’s another alternative that makes sense,” Emanuel says. The former White House adviser calls high risk pools a “terrible idea” and believes the proposed plan put forth by House Speaker Paul Ryan (R-WI) “isn’t coherent.”
Emanuel’s reform bids include a better marketing campaign, renovating the website, bringing more awareness to the individual mandate penalty, and decreasing price inflation.
To Emanuel, the Affordable Care Act is a work in progress, but one that can’t be amended until the Republicans get on board. “We’ve had people praying for its failure, working to make it fail, claiming it’s terrible, and then saying ‘you know, you didn’t make it work.’ Well, reforms couldn’t be introduced, changes couldn’t be made, and flexibility was denied at every turn.”
Despite their vast ideological differences, McCain and Emanuel do agree on one thing. The distastefulness of the public option: a proposal to create a government-run insurance provider, which is part of Hillary Clinton’s healthcare platform.
“It’s like throwing gasoline on the fire,” chides McCain.
Emanuel agrees it’s not the best recourse, but it might be the only option if the government can’t incentivize private insurers to remain on the exchanges. “If you can’t get insurers in certain places it may be the thing you need to do. I don’t think it’s anyone’s, and I don’t even think it’s [Hillary Clinton’s] first option.”
The troubling reality is that it doesn’t matter how many insurers pull out of the exchanges or how high premiums rise. No valuable changes will be made to improve the Affordable Care Act if Washington cannot agree on more than just the undesirable nature of the public option.
“This is a political gridlock issue. There are things that have built up that need to be done and… I hope the Republicans can now see that it’s in their interest to work with the democrats on making sensible revisions,” says Emanuel.
But for now, there’s at least one Republican Senator who is content with watching America question the effectiveness of the Obama Administration’s most highly touted accomplishment. “The whole thing is unraveling as many of us predicted it would.”