Saturday, August 27, 2016

Editorial: Private Insurance Fails

Aetna’s decision to pull out of health insurance markets under the Affordable Care Act in all but four states is further evidence that for-profit corporations cannot be trusted to provide health insurance. Hillary Clinton and other Democrats should push to expand Medicare as a public option.

Aetna’s withdrawal from the health insurance exchanges forces nearly a million customers in 11 states to find coverage from different insurers in markets where their options are reduced. It followed announcements by two other large insurers — Humana and UnitedHealth — that they would scale back their participation, saying they could not sustain financial losses they were incurring in the ACA’s state markets, where 20 million Americans have obtained coverage in the past three years.

The insurance companies claim they aren’t making enough money because too many people with serious health problems are using the “Obamacare” exchanges, and not enough healthy people are signing up.

Aetna announced the withdrawal after the Department of Justice decided to block Aetna’s proposed $37-billion merger with Humana. The Justice Department sued on the grounds that merging two of the nation’s five largest insurance providers was an antitrust violation that would strangle competition in the marketplace.

In a letter to the Department of Justice dated July 5, Aetna CEO Mark Bertolini made a clear threat: If President Barack Obama’s administration refused to allow the merger to proceed, he wrote, Aetna would be in worse financial position and would have to withdraw from most of its Obamacare markets, and quite likely all of them. “[I]t is very likely that we would need to leave the public exchange business entirely and plan for additional business efficiencies should our deal ultimately be blocked,” he wrote.

David Dayen noted at that Aetna is doing precisely what a monopolist does — using its market power and political influence to achieve a goal that would allow it to acquire more power and influence. “It’s heartening that the Justice Department did not base its antitrust decision on Aetna’s threat. But it shows how market concentration in the insurance industry was out of control well before Aetna and Humana decided to team up. If Aetna makes that threat and there are 20 other market participants offering insurance on the exchanges, it rings hollow. Only because of the current concentration is that threat credible. And a concentrated industry that serves as a pillar of the president’s biggest legacy item may not be a reliable partner.”

Wendell Potter noted that even if some of the people enrolled in Aetna’s Obamacare exchanges were sicker than they had anticipated, making it necessary for them to pay more in medical claims than they had wanted to pay, “it got significantly more money from taxpayers ... via the government’s Medicare and Medicaid programs, which have become cash cows for Aetna and many other insurers.”

In fact, although Aetna claimed a pretax loss of $200 million from individual public exchange business in the second quarter, it reported significantly more income in the second quarter of this year than it made during the same period last year — far more than even Wall Street analysts had expected. Aetna’s operating earnings increased 8.5%, from $722.1 million during the second quarter of 2015 to $783.3 million in the second quarter this year. Total revenues for the quarter also increased handsomely, to just a few bucks shy of $16 billion, Potter noted.

The Charlotte Observer noted that Aetna enjoyed a record $6.5 billion in government program premiums in the first quarter. “In other words, doing business with the government isn’t so bad after all. In fact, it’s gotten especially good since Obamacare came along, thanks largely to the Affordable Care Act’s expansion of Medicaid in most states … Medicaid, like Medicare, offers the best of most worlds for insurers – it’s single-payer, government-financed insurance, and it has low enrollee costs. So while insurers like to gripe about the individual Obamacare exchanges, they have no issues with the big Medicaid profits that Obamacare helps provide.”

Aetna’s pullout from Texas will leave seven more counties with only one insurer to offer an individual market plan next year, in addition to 50 counties that had only one insurer last year, the Texas Department of Insurance reported.

In Texas, Sabriya Rice reported in the Dallas Morning News, discussion of the issue might be hampered by the extreme division between pro- and anti- Obamacare groups, said Lance Lunsford of the Texas Hospital Association.

“Too many policymakers in the state run on an ‘anything but Obamacare’ platform,” he said. “Considering the complexity of health care, that’s not a very healthy way to go about thinking about the needs in Texas,” where 1.3 million Texans get insurance from the exchange but 18% of adults still lack insurance..

Richard Mayhew notes at that one of the states Aetna is pulling out of is Pennsylvania, even though, according to the company’s rate application memo, submitted to state regulators in June, Aetna made $13.6 million on the individual market in 2015 and it expected a profit in 2017. “Conditions have not changed enough to make Pennsylvania a money loser in under two months,” Mayhew noted.

But Aetna is pulling out of “nice, profitable, Democratic-leaning Pennsylvania,” Kevin Drum noted at “It’s very peculiar, isn’t it?”

If the pullout of Aetna, Humana and UnitedHealth from the exchanges shows us anything, it is that a “free market” does not work in ensuring equitable health insurance choices without strong government regulation.

If insurance companies want a piece of the action in profitable Medicaid and Medicare Advantage programs, the government should require them also to participate in the exchanges. Those companies should be able to show a profit in the long run, as rising penalties drive more healthy people to participate in the marketplaces.

Hillary Clinton has proposed creating a new “government option” for health care coverage to compete with private insurers taking part in the exchanges. Clinton also has proposed a tax credit to help lower-income people afford their insurance deductibles and copayments. And, in an effort to woo supporters of Sen. Bernie Sanders, Clinton has proposed lowering the eligibility age for Medicare from 65 to 55.

The US Department of Justice also should look into whether Aetna, Humana, UnitedHealth and other insurance companies have engaged in restraint of trade.

Sanders said he will reintroduce legislation to establish Medicare-for-all single-payer system in the next session of Congress. “The provision of health care cannot continue to be dependent upon the whims and market projections of large private insurance companies whose only goal is to make as much profit as possible,” Sanders said in a statement.

Republicans have remained steadfast in their opposition to any fixes in President Obama’s signature domestic program — demanding that it be scrapped entirely. That would put Americans who now get their insurance from the exchanges, regardless of pre-existing conditions, back at the mercy of insurance executives who increase their profits by denying health care for their customers.

Whether you think Obamacare can be fixed, or Medicare should be opened up as a public option to compete with private insurance companies, or Medicare should be expanded to cover everybody, the first step is to elect Hillary Clinton as president and Democratic majorities in the House and Senate. — JMC

From The Progressive Populist, September 15, 2016

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