Obamacare’s Slow Throttling of Patients and Insurers

by Charles Katebi

Since Obamacare took effect in 2013, the cost of health insurance has exploded. Turns out it's very costly for the insurers themselves and some are paying the ultimate price.

In early October, one of those insurers, WINhealth, announced it faced severe financial challenges and was leaving the Obamacare exchange. Just 11 days later, the company declared bankruptcy, leaving 13,000 Wyoming customers uninsured.

In its press release, WINhealth blamed Obamacare's bailout program, known as the Risk Corridor, for shorting its promised subsidy. The Risk Corridor is a federal slush-fund established to subsidize less profitable insurance carriers with funds taken from more profitable ones. Unsurprisingly, not many insurers are making money under Obamacare. The subsidy program could only pay 12 percent of what it promised, forcing several insurers, including WINhealth, to shut down.

Obamacare's backers naively blame WINhealth's failure on Republicans in Congress. Kerry Drake wrote in WYofile that Republicans deliberately weakened the program by preventing Democrats from bailing it out with taxpayer dollars.

They made the right call.

Congressional Republican knew Obamacare would impose crippling costs on insurers and didn't want taxpayers on the hook for them. Thanks to their efforts, the federal government's 2014 budget barred the Risk Corridor from taking taxpayer dollars when it fell short. Obamacare was already set to add trillions to the federal debt, and Republicans didn't want to add a penny more.

What Kerry Drake and other Obamacare supporters don't realize is that Obamacare will fail, no matter how much money the federal government spends. Its architects hoped that millions of healthy individuals would sign up to make the math work. Before it became law, the federal government promised 15 million individuals would enroll during Obamacare's 2016 insurance enrollment period, from November 1, 2015 to January 31, 2016. Even the Obama administration now admits that figure is unrealistic and now estimates just 900,000 new customers will sign up.

After Obamacare drove up premiums and deductibles, it simply doesn't make any sense for healthy people to buy insurance. According to the US Census, the average 18-34 year old spends just $600 a year on medical care. But the least expensive Bronze plan on the federal exchange in Wyoming costs $3,672 in premiums and has a $5,500 deductible. Does that sound like a good deal to you?

It only makes sense to buy such expensive insurance if you are extremely sick and require costly treatment. WINhealth was hemorrhaging cash paying claims for sick customers and didn't have enough healthy ones to pay for them. Wyoming's Department of Insurance revealed in a press release that the insurer burned through $5.3 million in savings to pay claims.

Without healthy people enrolling, insurers have to raise premiums or risk going out of business. Last year, premiums increased a whopping 53 percent in Wyoming. But even that wasn't enough to save WINhealth. Wyoming's remaining insurers, both on and off the exchange, now plan to raise premiums another ten percent in 2016.

Despite enormous premium increases, insurers are losing money hand over fist selling Obamacare coverage. After analyzing insurance claims, analysts at Mckinsey found that insurers lost $2.5 billion selling insurers on Obamacare exchanges.

For a health insurer to stay in business, it needs enough healthy individuals paying premiums so it can pay the medical bills of its sicker customers. But under Obamacare, only the sickest and most expensive patients are signing up for insurance.

No matter how its supporters try to spin it, Obamacare has been a disaster for everyone. Taking more money from taxpayers wouldn't have saved WINhealth, and certainly wouldn't make healthcare more affordable.