Obamacare

Crony Capitalism is a Feature (Not a Bug) of Obamacare

The Affordable Care Act (ACA) has always been an alliance of big business and big government.

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Crony capitalism, baked into the cake.
Pete Souza/Wikimedia Commons

So a giant, rent-seeking insurance company is accused of having threatened to leave Obamacare's health insurance "marketplace" if the government didn't approve its giant merger. If true, this would be the least surprising development in the past six years of Obamacare fiascos. Any giant regulatory scheme bringing together big business and big government inevitably leads to cronyism and corruption.

Not long after the Justice Department blocked Aetna's merger with Humana, the company announced it would be scaling back participation in Affordable Care Act (ACA) exchanges. Now, Obamacare consumers in 11 states won't be able to keep their insurance, even though, one imagines, they like their plans. But choices are getting scarcer by the year. Aetna is now one of about a dozen major insurance providers that have dropped completely out or scaled back participation in exchanges.

A recent Kaiser Family Foundation study estimates that 664 counties will only feature one single insurer on Obamacare exchanges in 2017. In 2016, it was 225. Four entire states will have only one Obamacare insurer. In one Arizona county, there may be none. Since Obamacare, in effect, solidified in-state insurance cartels, the exchanges are starting to look very much the same. But opening markets up across state (and national) lines is a silly idea, I bet.

At first, Aetna denied that its move was connected to the Justice Department's merger decision. Even in the most generous reading, this turns out not to be exactly true. At The Huffington Post, Jonathan Cohn and Jeffery Young have gotten their hands on a letter from Aetna's CEO that critics seem to believe catches Aetna threatening the administration.

The correspondence has gotten Democrats very agitated, even though their policies are creating the problem. Even before the letter was uncovered, Sen. Elizabeth Warren (D-Mass.) and others lamented the rise of corporate power rather than the convoluted regulatory environment that fosters an unhealthy relationship between business interests and government power. Warren said, "The health of the American people should not be used as bargaining chips to force the government to bend to one giant company's will."

To be honest, although I have little doubt Aetna was hoping its position on the exchanges would help with the merger, the letter sounds less like extortion and more like a sensible decision that any accountable executives would make when their company is facing losses. The real outrage isn't that insurers like Aetna are abandoning Obamacare, but that companies like Aetna likely participated in Obamacare for cronyistic reasons to begin with.

The ACA has inhibited competition, which has only benefited big companies. Still, insurers are losing billions in the exchanges, and at some point it's too expensive to be in bed with Obama. Why would UnitedHealth, the nation's largest insurer, participate in a program that expects almost $1 billion in losses between this year and last? Aetna lost more than $430 million since January 2014, and it was expected to lose $300 million this year. Merger or no merger, Aetna would almost certainly stay in the exchanges if it made fiscal sense.

Democrats will face increasing pressure to make this social experiment work. For instance, according to The Huffington Post, the Justice Department asked Aetna CEO Mark Bertolini how the merger would affect his company's participation in exchanges. So it's not like Aetna collaged a ransom note together and mailed it to the president. The Justice Department was curious about how the merger might impact the administration's struggling health care policy — which is a political consideration.

Moving forward, would a company be looked upon more favorably by a Hillary Clinton administration if it continued to sell plans in the exchanges? Maybe. Should insurance providers that choose not to participate be concerned about retribution from the administration or vociferous hard-left senators? Will the government, for instance, uncharacteristically respond to an open-records request super-quickly to try and embarrass a company with some misleading letter? You never know, it might happen.

On the other hand, will insurance giants that still operate within the exchanges be able to make larger and larger lobbying demands from a government that is feeling increasingly pressured to save exchanges from death spirals? I guess we'll just have to trust them to work it out.

Democrats reacted to inevitable news that you can't regulate affordability into markets by offering even less dynamic ways to "expand coverage." Clinton has promised to bring back the "public option," which is still a euphemism for a government-run insurance program that would be completely detached from the price of health care and, like every similar program, turn into a giant unfunded liability that never stops growing.

You'll remember also that when debating Obamacare, Democrats regularly demonized the insurance industry for profit-mongering (always an overblown assertion). Today, Warren demands that insurance companies lose money to help keep Obamacare solvent. These shortfalls are hidden taxes collected by insurers and paid for by consumers — for economic patriotism, I guess.

As a welfare program, Obamacare might be a success. (Insurers that focus on Medicaid sure do well) As a business, though, not so much. So it's worth noting that when liberals celebrate Obamacare enrollment numbers or other successes, these fabricated "marketplaces" feature subsidized products sold to consumers who are compelled to participate or pay fines. Yet even then, they hemorrhage companies and dollars and breed the kind of cronyism that Americans claim to hate.

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  1. “The ACA has inhibited competition, which has only benefited big companies. Still, insurers are losing billions in the exchanges, and at some point it’s too expensive to be in bed with Obama.”

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  2. I still don’t understand why the big insurers got behind Obamacare in 2009/2010. Did they just screw up their calculations?

    1. Good question. Arm twisting? Trying to get the best deal out of a shitty situation? ie – they knew something was going to get passed so why not try to get something to line their pockets. Whoops.

    2. Did they really have a choice? I can guarantee that the regulatory retribution for not backing it would have been severe. That, and they’re notorious rent-seekers anyway.

    3. Miscalculation?

      They thought the laws/restrictions would favor them.

      But they didn’t count on people’s ingenuity to game the system.

      “game the system” is human nature, derived from our basic desire to pay as little as possible for as much as possible.

      1. The biggest form of “gaming the system” would be adverse selection; fact is, ACA is really shitty insurance, more so if you actually have to pay for it [and immediately incur a several thousand $ deductible]. The overwhelming majority of person with this coverage are either expanded MCD in States that allow for that, and the rest are highly subsidized and actually pay very little [because “government” money from tax revenue foots the bill] at around $60-$80 a month. Of course the persons who sign up were often excluded due to prior existing health issues, and therefore cost more than the accumulated premiums. The young and healthy have been staying away in droves, and will not join until the penalty outweighs the cost.

    4. They figured they would be getting all the government contracts. Obama was basically promising that they would be receiving billions of dollars in government subsidies to keep the exchanges afloat. But it turned out not to be the case, have to pass it to find out what’s in it and what not.

    5. Remember the words attributed to a representative of a large health insurance company: “if you are not at the table, you are on the menu.” The health insurance companies played ball to avoid something even worse for them.

    6. Risk corridors. They thought that they would be bailed out. Guess The administration lied to them, too.

      1. If you like your company, you can keep your company.

      2. As pointed out elsewhere on H&R, “The risk corridors provision was essentially a backstop built into the health law to help insurers balance out profits and losses during the first years of the program. Insurers whose claims came in lower than expected would make payments into the government-run program, while those whose claims came in higher than expected would receive payments.
        In theory, the payments even out, with some insurers paying in and others being paid out. That was certainly the expectation when the bill was passed: The Congressional Budget Office (CBO) scored the provision as revenue neutral?costing taxpayers nothing.”

        Remember this answer to the question from the first Democratic presidential debate: Which enemy are you most proud of?
        Hillary Clinton: Well, in addition to the NRA, the health insurance companies, the drug companies, the Iranians. Probably the Republicans.

        As the establishment candidate from the Democratic party, the party that passed Obamacare without a single Republican vote, is it any wonder that the insurance companies are now feeling the pain?
        Elect Hillary and it will be single-payer healthcare to the rescue

    7. They may have, and may still be, playing the long game and hoping for single payer.

      It’s always nice when you can make a profit by greasing a politician rather than having to please a customer.

    8. Big insurers signed up for the short term gravy train provided by the “risk corridors” and also to play cronyball and squeeze the smaller players out. They knew they were on the road to single payer for medical but by at least getting on the exchanges, they’d have the opportunity to access & acquire millions of new customers for ancillary products – medicare supplemental, life, hospital indemnity, vision, etc.

    9. You’ll see when emperess Clinton starts the bailouts.

    10. They know they will become the administrators of the new government-run healthcare system. I have met some of these big health insurance CEOs and Presidents at conferences in New York. They speak the same language and are from the same backgrounds as their government counterparts, with lots of revolving doors between them.

  3. The funny thing about cronyism is that companies decide to play that game in hopes that the government will serve them their competitors on a silver platter. They neglect the fact that they then become a later course.

    1. Perhaps.

      But the people at the top are consistent winners through government.

      When you say “companies”; they are just people. They are either the shareholders or the employees (and to some extent, the customers).

      Perhaps the shareholders and employees will get hurt, but the connected employees (mainly the C levels) are mostly untouchables.

      The solution to crony capitalism is a small government
      The solution to corruption is a small government
      The solution to increased inequality is a small government
      The solution to criminal justice is a small government

      It feels like there is a theme going on …

      1. The solution to crony capitalism is a small government
        The solution to corruption is a small government
        The solution to increased inequality is a small government
        The solution to criminal justice is a small government

        On this we agree.

        But, I’ll offer this – the skills that are necessary to create a great company that is even in the position to exploit the crony game are very different from the skills that are necessary to thrive in the crony game itself. In some cases, the same people have both skill sets. In a great many others, not. And the guy who falls for the siren song of cronyism only finds he’s displaced by someone more skilled as a crony.

  4. The ACA has inhibited competition, which has only benefited big companies.

    And everybody else – if we can get a few big mergers we’ll wind up with just one insurance company and, ta dah!, single-payer healthcare! Isn’t that the end game, single-payer healthcare? Won’t that be wonderful? Just like most places that have a monopoly cable company, don’t they provide the best service at the lowest price since they don’t have that silly duplication of services that leads to higher prices and corner-cutting on the product? Capitalistic competition is just such a drag on the economy, get rid of competition and just watch the prices fall and quality soar!

  5. “The health of the American people should not be used as bargaining chips to force the government to bend to one giant company’s will.”

    “However, the health of one giant company SHOULD be used as bargaining chips to force one giant company to bend to the government’s will.”

  6. Our only hope now is to institute a single payer system. Sorry, but the big capitalist insurance companies were too greedy.

    1. Sarcasm? Look at the profit margins of insurance companies, they have never been good. The issues tend to stem from price fixing by other countries which force Americans to pay more, anti free market regulation, the FDA slowing progress, malpractice insurance, and government injecting money into the system through medicare and medicaid (similar to why tuition has grown so much recently). We haven’t yet even come close to trying a free market system. The idea that health care won’t work in a free market is based on absolutely zero evidence, with all other evidence to the contrary.

    2. You mean the insurance companies that only exist today because of meddling by the government in the maximum wages a company could pay their employees at the turn of the century?

      Good thing no one remembers that, otherwise they might insist the government doesn’t try to fix a mess it literally created through it’s meddling in the first place! That could be disastrous!

      And yes, our United States Government, at one time, limited the maximum wage that could be paid out. That worked out so well, right?

  7. Amusingly, but unsurprisingly, a government mandated health program has directly led to a virtual monopoly of service in various parts of the country.

    You know, like virtually every other thing the government ever does. Who could have possibly seen this coming?

    Oh, that’s right. Almost everyone here saw it coming. Which means it was entirely predictable by the so-called ‘Experts’, which means this is in fact a feature not a bug. Foreseeable consequences are not unintended consequences. Words to live by.

  8. RE: Crony Capitalism is a Feature (Not a Bug) of Obamacare
    The Affordable Care Act (ACA) has always been an alliance of big business and big government.

    Obamacare should be praised endlessly because now The State has made another instrument of control over the unenlightened masses. Comrade Lenin wisely stated that in order to control the little people a government-run health care system must be in place. How true his words are. Now, thanks to idiots in charge of all the untermenschen, The State can further enslave us for the benefit of the ruling elitist filth domineering our lives. What joy this must bring every citizen to this country knowing a bunch of bureaucrats, politicians, and their cronies can now make life and death decisions over us by not allowing medication to be dispensed to the politically unconnected, deny life saving surgery to voters who voted for the wrong candidate, deny the doctor we wish to see and raise our medical premiums to the highest point of the galaxy. So let us all get on our knees and thank our Creator we have a bunch of clueless, over-educated assholes who took the time and trouble to make our lives more miserable, confusing and complicated.

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  10. The point of programs like ObamaCare, Dodd-Frank and Net Neutrality is to undermine the business model in an industry and clear the way for a government takeover/nationalization.

    Trump and Clinton both favor single payer systems, so that will be the next step – unless Johnson/Weld somehow win.

  11. Help me out here. The ACA passed even though there were zero provisions to tackle why health care was expensive. They made a mandate everyone get on board and then Obama almost immediately started making exemptions. Now you hear there aren’t enough people enrolled.

    Why isn’t the story about all the expeditions causing there to not be enough people enrolled? Is my memory just screwy because of IPA and nerve meds?

    1. No. Don’t know about nerve meds but IPA contains powerful memory enhancers. Not in the same class as Porter, but beneficial nonetheless.

  12. “Clinton has promised to bring back the “public option,” which is still a euphemism for a government-run insurance program that would be completely detached from the price of health care and, like every similar program, turn into a giant unfunded liability that never stops growing.”
    The reality is that as long as the FED facilitates government debt there are no “unfunded liabilities”. I’ve predicted for years that the whole scheme was on the verge of collapse. I’ve been proven wrong, at least in the short term. Looks like my ashes will be in the wind somewhere before the bills are finally due and payable. Hilary wants single payer and if elected she may get it and the treasury will cut the checks. The “price” is irrelevant and in fact unknown due to government created market distortions.

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  14. Get ready for madame president to extend Cronycare and make it even worse.

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