What if the government threw an entitlement party and nobody came?
Okay it's not nobody, but today's United Health Group earnings warning because of deeply disappointing Obamacare enrollment numbers and the collapse of several ACA co-ops should serve as major alarm bell for the private insurance industry. Simply put, the numbers Uncle Sam promised the insurers haven't materialized. And that's why United Health is in trouble. The number of people enrolled in ACA-created state insurance exchanges in the coming year is now projected to be about 10 million. That's half the 20 million number last projected for 2016. A 50% shortfall might be normal for government agencies that don't have to worry about shareholders and scrutiny from the financial media, but private corporations tend to get killed for that kind of a miss. Oh, and more than half of the health care law's 23 insurance cooperatives have now failed, which could put taxpayers on the hook for more than $1.2 billion and leave about 700,000 of their members uninsured.
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Both the private insurers and the Obamacare co-ops are suffering from the same problem so many experts warned would materialize: too few healthy and young enrollees to pay for the too many older and sicker customers. The number one reason for this disparity is the high deductibles that far exceed any IRS tax penalties for being uninsured. The young and healthy just aren't interested in premium payments and having to pay often as much as $3,000 out of pocket before any coverage kicks in. And no one should be shocked that no amount of silly ads with 20-somethings in feetie pajamas is going to change that.
What a difference from 17 months ago, when the private health insurers and their stocks were doing just fine when the first year's worth of Obamacare enrollment numbers were not as disappointing and the sector was looking forward to raising rates on all those new customers. But now those same insurers who supported the passage of the ACA might finally be realizing they're the ones who signed up for a bum deal. UNH and its peers probably expected the tax penalties to be higher, or bet that some other kind of coercion would get those enrollment numbers up. But they also probably forgot that no matter how arrogant an administration or political party can get, they still have to run for office once in a while. And no one wants to run for office while his or her administration is pushing everyone around.
Now United Health says it might pull out of the Obamacare health exchanges nationwide. Good luck with that. The company is certainly legally allowed to do so, but can you imagine the negative public relations storm it will have to weather for decades to come? The attacks from the Obama administration alone are likely to be sharp and relentless. And there isn't likely to be a lot of sympathy from conservatives still sore at the industry for helping to push the ACA over the legislative hurdles five years ago. Republicans will of course still be willing to help those companies, but it will likely come at a higher lobbying price.
And for the responsible, regular folks like you and me who have health coverage, this all means higher costs. United Health and its competitors aren't going to just eat the losses, they'll pass them on to the customers. It's all that much more depressing because the politicians told us that the ACA would reduce medical and insurance costs by getting more people to put skin in the game and pay for coverage. Once again, a government program sold as a net positive for everyone is ending up costing the most responsible and productive Americans more without enough positives for them or anyone else in return.
And I guess there's no Easter Bunny either.