11/01/2016

Photo (c) Fotolia Sick, elderly, and/or poor people who actually need health insurance are ruining Obamacare for the rest of us, if a common mantra of the health insurance industry is to be believed.

While not wording it quite as harshly, the health insurance industry has said that Affordable Care Act customers are making heavy use of medical services, more than the industry anticipated, costing health insurance companies revenue and explaining next year’s premium increases.

People who need Obamacare and who do not qualify for any government subsidies are expected to pay the price, as a recent report from the U.S. Department of Health and Human Services shows that premiums for policies sold on the Healthcare.gov exchanges are rising at a national average of 25% next year.

The premium increases follow months of major insurance companies groaning about financial losses thanks to Obamacare customers. In March 2016, insurer Blue Cross Blue Shield published a report stating that people who signed up for health insurance under the Affordable Care Act have higher rates of certain diseases “than individuals who had BCBS individual coverage prior to health care reform.”

A Blue Cross Blue Shield lobbyist quoted in an accompanying press release suggests that customers are visiting the emergency room excessively, among other problems. “Better communication and coordination is needed so that everyone understands how to avoid unnecessary emergency room visits, make full use of primary care and preventive services and learn how to properly adhere to their medications,” she says.

The month after the BCBS report was published, UnitedHealth, the nation’s largest insurer, announced that it was leaving almost all of the Obamacare markets due to the high expense of insuring patients. Aetna, the nation’s third largest insurer, followed suit this summer. “[Aetna] Chief executive Mark Bertolini said in a statement that there are not enough healthy people to financially offset those with major health problems who require high-cost care,” reported the Washington Post.

As with other major policy problems, millennials are also accused of making things worse. Consider all the young, healthy people who don’t want to pay for any insurance because they realized it’s much cheaper to just pay the penalty. The number of healthy people opting to go without coverage “helps explain why insurers are worried about the financial viability of the exchanges over time,” according to a New York Times report published earlier this year.

The refusal to expand Medicaid

Luckily for people in some states, policy analysts note that the premium increases won’t be distributed across the country equally.

“The story in California is really different,” Amy Adams, a senior program officer with the California Health Care Foundation, tells ConsumerAffairs. In California, premiums are only rising 13 percent next year, a relatively modest increase compared to the national average.

Adams and others credit the expansion of Medicaid with keeping Affordable Care Act premiums lower in California. They blame states that refused to accept federal money and expand Medicaid for bringing more sick people into the Affordable Care Act risk pool and driving costs up.

“We chose to expand Medicaid and we expanded it early,” which kept low-income people who may require more medical services out of the Marketplace risk pool, Adams says. In addition, California in 2014 banned insurers from selling plans that were less comprehensive than federal requirements, even as other states continued to do so."That made one big risk pool in California. So there was a lot more security and stability for the insurers."

In places like Texas, meanwhile, where state lawmakers have refused to take federal money to expand Medicaid, premiums are expected to rise by 30%, according to some estimates.

Record profits

But the claim that corporations are losing money on Obamacare ignores the record-breaking profits and compensation packages that health insurers continue to collect.

Consider UnitedHealth, the nation's largest health insurer that is leaving the marketplace next year. UnitedHealth claims that Obamacare has reduced its 2016 earnings by $850 million. While they might have $850 million less than they wanted, UntedHealth’s profits are still soaring.

In fact, UnitedHealth announced record-breaking profits in 2015, followed by an even better year this year. In July 2016, UnitedHealth celebrated revenues that quarter totalling $46.5 billion, an increase of $10 billion since the same time last year. And company filings show that UnitedHealth’s CEO Stephen J. Hemsley made over $20 million in 2015. To be fair, that is a pay cut. The previous year, in 2014, Hemsley took home $66 million in compensation.

"If you look at our Proxy, the Board lays out in extensive detail, in great detail, the thinking behind both CEO and executive compensation,” UnitedHealth executive Don Nathan tells ConsumerAffairs.

“At his request, Mr. Hemsley’s total compensation is below the median for CEOs in the Company’s peer group,” the proxy statement says, “even though the Board believes his performance has been outstanding."

In other words, Hemsley is far from being the only health insurance CEO making millions of dollars every year.

Sky-high profits

Aetna, whose CEO Mark Bertolini reported to the Securities and Exchange Commission a $27.9 million compensation in 2015, has similarly celebrated sky-high profits. “In 2015, we reported annual operating revenue of over $60.3 billion, a record for the Company,” Aetna recently told investors.

Aetna spokesman T.J. Crawford wrote a brief statement to ConsumerAffairs describing the company's losses under Obamacare: “As updated on our Q3 earnings call last week, we now expect a 2016 pretax loss in our individual products (on- and off-exchange) of approximately $350 million,” he said via email, otherwise directing questions to a company press release.

Thanks to the insurance industry’s combination of record profits in recent years and increasing premiums, people on both sides of the political aisle have criticized the Affordable Care Act as being more beneficial to the insurance industry than consumers, though politicians remain deeply divided on what a good, viable alternative would entail.

“Given this dysfunctional reality under the ACA, it’s remarkable that neither major political party has a plan to truly fix the situation,” wrote Dr. John Geyman, a professor and past president of Physicians for a National Health Program , a nonprofit advocating for a single-payer national health insurance program, in a recent column.

Meanwhile, Amy Adams, the program officer from the California Health Care Foundation, is optimistic that many consumers will not be stuck footing the bill for next year’s premium increases. She notes that people who qualify for government subsidies under the Affordable Care Act will not actually be paying the higher premiums. And neither, of course, will the people who receive coverage through their employer.

“I don’t think this a death spiral for the exchanges, I don’t think the sky is falling,” she says.