Obamacare: Cracks in the foundation

Health-Law Setback Becomes Campaign Fodder

​Aetna bolts the exchanges!

More below the fold.

The law is a violation of basic economic principles, and it is unclear why the insurers signed on to this fiasco. Presumably they believed that the government would do what was necessary to make the system work. But President Obama is not known for his ability to negotiate hard deals, and he took the expected easy way out, and simply stood pat on the deal, unwilling to change anything to save his only real accomplishment. Without his assent the law will remain in place, but it will eventually become so unworkable, so expensive that even the truly sick will not pay the premium. 

The Unstable Economics in Obama’s Health Law

"Barack Obama’s signature health-care law is struggling for one overriding reason: Selling mispriced insurance is a precarious business model.

Aetna Inc. dealt the Affordable Care Act a severe setback by announcing Monday it would drastically reduce its participation in its insurance exchanges. Its reason: The company was attracting much sicker patients than expected. Indeed, all five of the largest national insurers say they are losing money on their ACA policies and three, including Aetna, are pulling back from the exchanges as a result."

True. There are so many things wrong with Obamacare that it is difficult to discuss which one is the most damaging. But for insurers it is easy, they are losing money, and only idiots run businesses with a money losing model.

Aetna’s Healthy Perspective on Obamacare

True as well. Jumping ship from a money losing model to one where the insurer has a chance to make money is "healthy" what was not healthy was agreeing to the basic proposal in there first place. 

"The trend of health insurers pulling back from public exchanges raises concern for the future of the Affordable Care Act. It is far less of a worry for investors.

Aetna announced plans earlier this week to withdraw from 11 of the 15 states in which the insurer currently offers public exchange plans to individuals. It decided to exit the exchanges after the Justice Department sued to block a planned merger with Humana, The Wall Street Journal reported Wednesday."

The apt analogy is an airplane, all the engine fire warning lights are on, the hydraulic pressure is reading zero, the pilot can see the burning engines out the cabin window, yet he fully believes he will bring this baby in for a soft landing at the airport, 200 miles distant. Captain Obama is quite the pilot.

Expect more premium price increases, fewer insurers, and more foundational cracks. This cannot go on forever, but exactly where it will implode is anyones guess.