The backbone of the Affordable Care Act (ACA) is faltering as insurers begin withdrawal from health care exchanges.  Insurers are the main workhorses in the ACA – they accept premium payments from subscribers and subscriber-subsidies from government.  As well, insurers handle the administrative detail of confirming eligibility, premium payment and they pay for service from hospitals, physicians and ancillary health care providers for treatments meeting ACA standards.  Government sets the list of treatments and conditions that must be covered and it audits the insurers.  The exchanges operate at a federal or state level, host the insurers for each state, and present consumers with coverage and pricing information to be considered before choosing an insurance carrier.

In theory, this system could work, but the choice of insurers is becoming thinner and consumer prices less affordable.  Pushing ACA prices even higher are the short term insurance plans that attract the young and well – subscribers that ACA plan designers hoped would subsidize the old and sick in the ACA risk pool.

Insurers are continuing a slow exodus United Health has withdrawn from the health care exchanges in 27 states due to heavy operating losses.  Last year, United lost $475 million and this year it expects to lose nearly $500 million.  This means United offers health coverage in only 3 states.  Humana exited from several markets, and Premera will leave Oregon and some Washington state markets.  Some health insurers such as Aetna were reluctant to join an exchange anyway.

In 2014, “only about a quarter of insurers reported that they made a profit on their individual plans” and in 2015, the insurance companies lost as much as 11%.  Losses were steeper than in the first year and more than half of the not-for-profit enterprises found the costs daunting.  Thirteen of ACA’s 23 CO-OP health plans failed and closed. Many areas of Alaska, Kentucky, Mississippi, Oklahoma and Tennessee have just one exchange insurer to choose from.  Before, ACA those states had many more insurers.  Unsurprisingly, remaining exchange insurers need to hike premiums by double digits.

The ACA is built around forces that push costs high; acceptance of pre-existing conditions, very broad scope of covered treatments, few incentives for subscribers to shop for lower cost treatments, and few competing insurers vying for subscribers.  Inclusion of young and healthy subscribers, as well as competition among insurers in each exchange, was the main strategy that could have held prices in check.  Next year, dwindling competition between insurers leaves consumers at the mercy of higher prices, and they are expecting a 17% price hike for 2017.

When consumers miss the ACA’s formal enrolment periods, they have a choice of remaining uninsured until the next official enrollment period, or subscribing to a short term coverage plan from an insurer who operates a temporary coverage plan (must be 364 or fewer days).  Short-term plans “don’t meet… ACA standards, since they are priced according to the health status of a customer, can discriminate against customers who have pre-existing conditions, and do not have to cover a set of minimum essential health benefits.”  The short term plans do not insulate consumers from tax penalties that applying to those without ACA-compliant insurance.  Despite the shortcomings, subscribers want the short term health coverage enough to buy it, but government finds that to be tolerable and is pushing aside short term plans.

To re-capture the young and healthy subscribers, “HHS said it would begin to fully implement a confirmation process for so-called special enrollment periods outside of the limited open-enrollment sign-up season for Obamacare plans.”  Government is reversing its neglect of consumers between official ACA enrollment times, hoping that more low-risk subscribers will jump aboard the ACA coverage train.  This will reduce the number and health status of subscribers available for the temporary plan insurers to cover.

America’s health care sector has been subjected to massive re-engineering so that the 13 million ACA subscribers (downward revised forecast for the period ending 2016) can get a very costly version of health coverage.  Even worse, the ACA deepens rifts among the other 320,000,000 Americans who are not ACA subscribers, but who will be taxed to pay the $1 trillion in ACA subsidies in the coming years.  ACA remains divisive and even today, insults about voter stupidity infuse many discussions.

While not a repeal of the ACA, a new effort offering substantial improvements to American’s health care options is underway in the Congress.  The bill, H.R. 5284—The World’s Greatest Healthcare Plan Act of 2016, (introduced by Representative Pete Sessions of Texas and Senator Bill Cassidy of Louisiana) leaves much of ACA intact. It peels back some of the unpopular “thou shalts” that provoke rejection by mainstream Americans.  At the same time, H.R. 5284 keeps arrangements that ACA’s proponents would find attractive.  If consumers are fortunate, Congress and the White House will work together to embrace these much needed improvements in health care options for Americans.