Affordable Care Act in Trouble as Big Insurance Companies Pull Out

Insurers report $2 billion in losses

After surviving numerous legal challenges and attacks by Republicans in Congress, plus a botched rollout in 2013, the controversial Patient Protection and Affordable Care Act (PPACA) now faces what may be its most serious threat: The program has been a money loser for the nation’s biggest insurance companies. The four leading U.S. health insurers have admitted that they are each losing hundreds of millions of dollars on their PPACA plans, according to a report from Bloomberg Businessweek, and many are pulling out of the internet “exchanges” that were set up so people could shop for insurance plans.

UnitedHealth expects to lose $850 million on its PPACA plans in 2016, while Aetna, Anthem, and Humana are all on track to lose at least $300 million each on their plans this year, according to Bloomberg. UnitedHealth said it is quitting 31 of the 34 states in which it sells PPACA policies. Humana is exiting eight of 19 states and is reducing its presence to just 156 counties––down from 1,351 a year ago. Anthem hasn’t announced plans to change its participation in the program.

On average, insurers are looking to raise premiums by approximately 24% in 2017, Bloomberg says.

Advocates of the PPACA had hoped that government subsidies to consumers would persuade healthy people to sign up for the plans. But policies have largely been taken out by older, less-healthy people who are more expensive to insure.

“What we are left with … is a highly subsidized program for relatively low-income people,” Dan Mendelson, CEO of the consulting firm Avalere Health, told Bloomberg.

President Obama recently revived the idea of introducing a public plan to compete with private insurers––something that was debated but ultimately left out of the final version of the act. He also suggested that increased government subsidies could help attract more people to the PPACA’s markets. Another option––giving insurance companies more government money––would require action from a Republican-controlled Congress, which would rather repeal the PPACA than fix it.

Kevin Counihan, who oversees health insurance markets for the federal government, has raised the idea of creating a special fund to help insurers cover particularly expensive patients, perhaps ones who rack up more than $2 million in medical bills in a year. In a blog post, he suggested that states could take steps to help insurers by shouldering some of the costs of particularly sick people.

Some insurers want to widen the difference between what they charge their oldest and youngest customers. Under the PPACA, premiums for the oldest are typically limited to three times those for the youngest. Widening that ratio would theoretically help draw in more young, healthy people by lowering their premiums, but it would also raise costs for older people.

Republican presidential candidate Donald Trump has said that he would repeal the PPACA, but he hasn’t explained what he would replace it with. Hillary Clinton has backed the creation of a public insurance plan, as well as offering people 55 years of age and older the option of buying Medicare coverage.

Source: Bloomberg Businessweek; August 17, 2016.