Breakingviews: Obamacare fails to cover U.S. insurers

Aetna is the latest of the big five U.S. health insurers to announce its withdrawal from exchanges selling subsidized health plans. It is withdrawing from 11 of 15 state exchanges, established under the Affordable Care Act to provide a centralized market for standardized policies eligible for subsidies. The law, usually known as Obamacare, is reducing the number of uninsured, with about 13 million people signing up for plans in the year ending in February. But some private insurers, needed for the whole setup to work, seem unable to make money. Aetna, for example, said on Monday it had pre-tax losses of $200 million in the second quarter from offering individual health plans, though the company didn't indicate how much of these came from plans sold on exchanges. The Department of Justice is attempting to stop Aetna's $33 billion purchase of Humana and Anthem's $44 billion deal to buy Cigna on antitrust grounds. Backers of the mergers say the combinations will help them offer products on exchanges. So there's a possibility the insurers are playing up difficulties. Yet UnitedHealth, which has resisted the M & A wave, is also withdrawing from most exchanges in 2017. More from Breakingviews : Two $150 bln-plus tech giants face divergent futures That points to underlying problems. The biggest is that patients are fewer and sicker than expected – so-called adverse selection. The Congressional Budget Office predicted 8 million more people would sign up in 2016 than actually did. Employers have not dropped health coverage to the extent expected. That means fewer healthier people applying through exchanges, and therefore greater outlays per person than insurers projected. There are also ways for other big players in the U.S. healthcare system, like hospital chains and drugmakers, to game the ACA because what they get paid can change under different circumstances. That too may be adding to insurers' bills for exchange-based coverage. Like any complicated law, some aspects of Obamacare need tweaking after the fact. Things like removing opportunities for gaming the system and widening the range of different premiums allowed – currently at most three times as high for older people as younger folks – could address some of the flaws. But it's a hot-button political issue, and there's little hope of the compromise needed to make such changes. Without that, private insurers may be squeezed out. For more independent commentary and analysisfrom Reuters Breakingviews, visit breakingviews.com

Supporters for the Affordable Care Act during a rally

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Aetna is the latest of the big five U.S. health insurers to announce its withdrawal from exchanges selling subsidized health plans. It is withdrawing from 11 of 15 state exchanges, established under the Affordable Care Act to provide a centralized market for standardized policies eligible for subsidies. The law, usually known as Obamacare, is reducing the number of uninsured, with about 13 million people signing up for plans in the year ending in February. But some private insurers, needed for the whole setup to work, seem unable to make money.