WSJ Opinion: ACA Sicker Shock and the Election

Hillary Clinton admits she’s running to extend the Obama legacy, and so far she’s had a free ride in defending it. She hasn’t even had to explain the increasingly obvious failures of ObamaCare to deliver the affordable insurance that Democrats promised.

The Affordable Care Act is now rolling into its fourth year, and even liberals are starting to concede that the insurance exchanges are in distress and Congress may have to reopen the law. Premiums are high and soaring; insurers have booked multimillion-dollar losses and are terminating plans; and the customer pool is smaller, older and less healthy than the official projections.

The natural result is another round of rate shock for 2017. Insurers in 49 states have submitted their premium requests to regulators, and the average “enrollment-weighted” rate increase, which accounts for market share, is in the range of 18% to 23%. The Congressional Budget Office projected 8%.

Liberals call this evidence anecdotal and premature, and they’re right that bad anecdotes are easy to find: Geisinger Health System in Pennsylvania, a model of the integrated care that ObamaCare attempts to promote, wants a 40% rate increase for its insurance arm. The other liberal claim is that insurance commissioners will approve rate increases somewhat smaller than the insurer requests (maybe) and that consumers can switch to cheaper plans (assuming any are left).

But consider New York, which last Friday became the second state to finalize rates for 2017. The 19.3% rate increase the insurers requested on average for the individual market came down to 16.6% after regulatory fly-specking. The New York political class is hailing this as a great victory, but overall health-care costs aren’t rising by near 16%, and middle-class incomes aren’t either.
Then there are such approved Empire State rates as high as 29.2% (Metro Plus and North Shore), 29% (UnitedHealthcare of New York) and even 89% (Crystal Run). And New York is one of the bright spots.

So is California, where 11 of the 12 health plans that sell coverage under the state’s ObamaCare’s rules turned a profit the last two years. Yet the state is now reporting a final average rate increase of 13.2%, up from 4.2% in 2015 and 4% in 2016. In states with is less competition, the exchanges are even worse off. The Kaiser Family Foundation estimates that as many as 664 U.S. counties (out of 3,007) may be served by only a single insurer in 2017, up from 225 in 2016.

A major problem is that more people are abusing the law’s lack of verification and undefined “special enrollment” periods. They wait to sign up until they need costly medical care like knee surgeries and then dump coverage again.

Another problem is that some providers (such as dialysis services) are using coupons and cash subsidies to promote poor people out of Medicaid and into ObamaCare. The standard of care is little better but reimbursements are higher, and providers pocket the difference.

ObamaCare’s designers said the law would stabilize by its third year as insurers learned to price the exchange population. But turbulence is increasing, not decreasing, and the same dysfunctions can’t be found in other government-managed markets like Medicare Advantage or the Federal Employees Health Benefits Program.

Some liberals say these double-digit spikes are nothing to worry about, since any increase will be offset by subsidies that grow at the same rate as premiums. In other words: Drop dead, U.S. taxpayer.

Yet only about half of Americans under age 65 without employer-sponsored insurance qualify for a subsidy. This higher-income and relatively healthier demographic is exposed to the full cost of ObamaCare and has no other options. The means-tested subsidies cut off at 400% of the poverty level, or about $47,520 for an individual and $97,200 for a family of four.

Even those who qualify for subsidies often aren’t better off. According to Health and Human Services data, some 45% of eligible people who participate in ObamaCare make between 151% and 200% of poverty, where the subsidies are most generous. That falls to 33% between 201% and 250% of poverty, to 17% between 251% and 300%. A mere one of every 50 people earning over 400% who lacks employer coverage has joined the exchange.

The Urban Institute estimates that the median consumer who earns between 400% and 500% of poverty must spend 18% of after-tax income on an ObamaCare plan. No wonder so many are concluding that ObamaCare isn’t a good value for the money, especially as insurers narrow networks of doctors and hospitals and shrink drug formularies to Medicaid standards.

All of this should be an opportunity for Republicans. Mrs. Clinton is proposing even more federal health-care planning. Voters might like to hear about alternatives, and a reform that expands choice and restores the flexibility for people to buy plans that fit individual needs and incomes could be popular.

The House GOP’s “Better Way” project makes real intellectual progress on such a plan, though Donald Trump hasn’t promoted its ideas so far. If the businessman wants to help his campaign, maybe he could talk about a better idea for health care.

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