From the beginning of the Affordable Care Act (ACA), we expected that Americans with pre-existing conditions would be more in need of intensive treatments and more likely to be eligible for premium subsidies. Most of us doubted that ACA would attract healthy young enrollees willing to pay full-sized premiums. Indeed 7.5 million workers paid a fine instead of enrolling in 2015. The expected ACA subsidized enrollment peak is 19 million people and the unsubsidized peak is 6 million. Now, 29 million lack health insurance, and that uninsured pool will remain larger than ACA at its peak. Despite addressing less than half the uninsured issue, ACA has been forced on the vast majority who are not already in a government insurance plan.
The surplus of sick enrollees in contrast with the shortage of healthy enrollees will continue dragging the ACA off the rails. ACA could be fixed by cost cuts such as pruning back the lavish scope of treatments covered or by reducing premium subsidies. Increasing the incentive for healthy people to enroll may help, but the cost of premiums and other out of pocket cost is daunting for most families. Punishing Americans by fining for non-compliance is opportunistic political sadism.
Government is accelerating this train wreck by refusing to pay so called “risk corridor payments” that it promised to offset insurer losses due to excessive treatment costs. Government says it hoped it could fund the subsidies by capturing excess profits earned by other insurers. The ACA has proven to be so unbalanced in design that there are no excess profits, just excessive losses due to high costs that are a consequence of enrollees who are much sicker than expected.
For most of the health insurers who offer coverage, the recent years have been a painful lesson. Aetna, United Health, and Humana each slashed participation in the state exchanges, in effect dumping territories where they lose the most money. Other large insurers are paring back ACA participation and the two dozen folksy health co-ops have been so beaten up by costs that only one-third remain.
While competitive choices for consumers are available in some areas, they are thin or absent in others and the future looks grim. But, the insurer departures are just a symptom of ACA’s design flaw. The flaw in ACA is that it offers insufficient incentives to attract enough healthy enrollees. While the cost versus revenue imbalance is allowed to persist, ACA cannot thrive.
We have an opportunity to fix the problem by correcting the cost/revenue imbalance. But instead, the Administration choses to focus only on the headcount of competitors, ignore ACA’s design flaw and bolt on a “public option.”
The public option will be a new competitor in the exchanges, but it will be a competitor with no allegiance to efficiency, a competitor which pays no taxes, and that will tow the party line on a moment’s notice. It will be able to outspend any other competitor and present the bill to the taxpayers. It will force out all private sector insurers. The option is the government, and when that happens, taxpayers must abandon all hope of avoiding a single payer system.