Obamacare

President Hillary Clinton May Not Be Able to Tape Back The Obamacare Humpty Dumpty

United Health's warning that it may pull out may cause the program to fall apart

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In my morning column at The Week, I mull the news last week that UnitedHealth, the nation's largest insurance

ObamacareOuch
rtcosmin / Foter / CC BY-NC-SA

company, might pull out of Obamacare next year because of the nearly $500 million in losses that exchange customers are visiting on it this year. The program's apologists are poo-poohing this as no big deal. Bloomberg View editorialized that United's announcement doesn't mean much. "The company covers less than 6 percent of the exchange population; if it does pull out, those people will be able to get other coverage," it said.

But "sorry to disappoint" (to use the editorial's words) you Obamacare fans, but this is a potentially life-threatening development for the program. I note:

Avik Roy, who serves as GOP presidential candidate Marco Rubio's health care advisor, suspects United may just be the first domino to fall. Other commercial insurers, such as Aetna, Anthem, and Cigna, have raised premiums by double digits and still say they can't make the numbers work in their favor. Hence, they have withdrawn from counties where their losses were particularly acute.

For-profit companies that have shareholders breathing down their necks don't have much latitude to absorb losses. But even companies that don't face similar profit-maximizing pressures can't escape the basic dilemma confronting the industry. For example, state filings of the non-profit Blue Cross Blue Shield show that the company barely broke even in the first half of 2015. In Texas last year, BCBS collected $2.1 billion in premiums and paid out $2.5 billion in claims.

If these companies pull out, then the adverse selection death spiral may shatter the Obamacare Humpty Dumpty so bad that even a President Hillary Clinton may not be able to find enough red tape to put it back together again.

Go here to read the piece.