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Obamacare is failing. And there's only one way to fix it

Supporter for the Affordable Care Act
Joe Raedle | Getty Images
Supporter for the Affordable Care Act

Aetna's pullback from the Affordable Care Act's (ACA) Insurance Exchanges is another bad omen in a growing list.

Throughout the controversial history of Obamacare, Aetna has been a stalwart continuing to voice confidence in the future of the program.

That confidence took an abrupt and sudden turn this week when it cited unsustainable losses as the reason it was cutting back from 15 states to only four. Aetna reported Obamacare losses of $200 million in just the second quarter and more than $430 million since January of 2014. They expect full-year exchange losses of $320 million in 2016 alone.

Most disconcerting was Aetna's report that their losses have gotten worse recently.

The architects of the new health law built into it a three-year program to help cushion early insurance company losses as those previously unable to gain coverage were expected to flood into the program at the start. By year three, they assumed, the risk pool, and the prices the participating insurance companies charged, would begin to stabilize.

But that hasn't happened. With each successive annual open enrollment the tendency of the sickest to buy coverage while the healthiest hung back has only repeated itself.

2017 will be year four for Obamacare and the picture is not pretty and getting worse.

The fundamental problem with Obamacare is that the health insurance plans carriers are selling are so unattractive—with their still high premiums even after subsidies, ever larger deductibles and narrower provider networks—that only about 40 percent of the exchange eligible population has signed up. The longstanding insurance industry rule is that 75 percent of the eligible must sign-up to get the enough healthy people in the pool to pay for the sick.

"Until we are willing to have a conversation about how to fundamentally change a failing program Obamacare is just going to continue to deteriorate."

My own marketplace experience matches that of Aetna—the risk pool is getting worse not better for many other participating insurers.

Aetna isn't the only major insurer to retreat from the insurance exchanges.

Humana and UnitedHealth Group have also announced that they will be exiting most of the states in which they currently sell ACA exchange plans.

In states across the nation, insurers are raising rates by double digits and insurers are citing Obamacare as the reason for layoffs.

Of the original 23 Obamacare not-for-profit health insurance co-ops funded with federal tax dollars, four more have recently failed taking the total number of insolvencies to 16.

Still, some Obamacare supporters are in denial.

Writing in the Wall Street Journal, Kaiser Family Foundation president, Drew Altman said last week, "We will have to see the 2018 increases to determine whether it is a short-term correction or a longer-term problem."

In the New York Times last week, Linda Blumberg of the Urban Institute said, "We have to be realistic,' noting that some large companies may not be nimble enough to succeed, 'You can't lower costs without breaking some eggs."

Said, Kaiser Family Foundation senior vice president Larry Levitt in the same article, "The market is sustainable but with a different mix of plans," that offer more narrow provider network Medicaid-like plans and some remaining Blue Cross Plans.

Hillary Clinton has discussed making the current unpopular Obamacare health plans more attractive by providing working class families with more tax credits to cushion the big deductibles and co-pays, introducing a government-run public option to compete with the insurance companies, and allowing those age 55 to buy-in to Medicare. But none of these ideas stands a chance so long as there is at least a Republican controlled House of Representatives.

Republicans also need to drop their unilateral Obamacare "repeal and replace" demands and get real about what is possible.

Obamacare has insured millions of people—particularly in the states that have expanded Medicaid (albeit a currently unsustainable program in its own right) and it has been attractive to the poorest that get bigger subsidies and lower deductibles in the exchanges. But Obamacare has been an utter disaster for the working and middle class that seem willing to buy the unattractive plans only if they are sick and can come out ahead on the deal.

Until we are willing to have a conversation about how to fundamentally change a failing program Obamacare is just going to continue to deteriorate.

That won't happen until supporters end their denial and Republicans admit they can't turn back history.

Commentary by Robert Laszewski, the president of Health Policy and Strategy Associates, LLC, who has twenty years of experience in the insurance industry, serving as a chief operating officer for nine of those years, before beginning his Washington, D.C. policy and market consulting business.