Aetna to withdraw from all Obamacare exchanges


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Finding out what’s in it: Aetna has decided to withdraw from all Obamacare exchanges, after seeing its profits increase when it reduced its participation partly last year.

Aetna has been gradually withdrawing from the Obamacare exchanges. It had decided to pull out of the exchanges in other states because it lost $700 million between 2014 and 2016 and was projected to lose $200 million in 2017 despite having already significantly reduced its participation in the exchanges to only four states.

A disproportionate number of unhealthy customers have signed up for the exchanges, which provide tax subsidies to pay for insurance, causing unbalanced risk pools for many insurers. Aetna also has cited uncertainty over the future of the law and over whether it will receive federal payments as a contributing factor to its decision. [emphasis mine]

The highlighted words illustrate the fundamental problem with the Obamacare law. It forces insurance companies to take on sick people who had failed to buy insurance before they became sick. Such an insurance model is unsustainable. Insurance works because enough people buy it before they need it, thus helping to fund those who need it. If everyone can wait until they need it then there is no pool to fund any payouts, and the insurance company goes bankrupt.

As is happening with Obamacare.

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17 comments

  • Max

    Aetna it’s not the only one backing out of health exchanges.
    https://www.ksl.com/?sid=45268583
    Molina just dropped 70,500 participants. Firing 1,500 workers. Some of the comments are heartbreaking. (47 customers for every worker laid off) CEO salary 9,800,000
    These exchanges cannot exist without federal funds to support them. As was planned, they were designed to fail.
    I think I had and intuitive Leap on single payer healthcare “American style”… All the governors want an increase to the states Medicade to cover those without health insurance. It was revealed that half of all Child births in this country are charged to Medicade. Apparently the infrastructure is already in place, increase in funding to the states is all that’s needed.

  • wayne

    Max-
    Ya’ beat me to the Molina Healthcare reference. (Article in the WSJ today on them, but it’s behind their paywall.)
    This hits ACA people in Wisconsin & Washington State primarily, and in some Counties they are the last participating company in certain “exchanges,” and they express doubts they will remain in the future.

    Their Revenues were around $5 billion last year, and they do make money– but have consistently lost money with their ACA policies.
    (They administer a bit of Medicaid in Michigan & Wisconsin, and they do make money on that Segment as well.)
    On the upside; the Founder (Mr. Molina) and his brother, were forced out by their Board last year (or 2) over issues of “compensation & spending.”

    Yepper, the Government absolutely has the mechanisms in place to control “everything.”
    Medicaid for example, is a Federal healthcare program, but it’s administered by the States, who in turn contract with companies such as Molina or Blue Cross, to actually run it. At best the Feds only cover 50% of the total cost of Medicaid, and they cover none of the costs of the recent expansion drive, much past 2018 or so. In most States, 25% of your budget goes to Medicaid.
    Medicare, as well, as administered by companies with contracts directly with the Feds.

    Insurance Companies are totally captured by the Government. I would put forth: the correct people to blame over all this are, our elected officials. It’s easy to hate these Insurance Companies but they are totally regulated. Willing CRONY’s yes, and they need to be subjected to honest-to-god marketplace driven competition.

  • Cotour

    Related, because Obamacare is a function of Democrat party Socialist doctrine:

    Not that the leadership of the Republicans is a power house of political strategy brilliance, they are not as we can all plainly see operating in Washington today. But the taking over of many major cities in America over the last 50 or so years by the Democrats which have exclusively had Democrat party management are the only evidence anyone needs. These cities are permanent nests of corruption and murder, and they all have a permanent culture of poverty which can be seen as a modern form of institutional slavery. This institutional permanent cultural of dependency which is a modern form of slavery manifested by Democrat control is designed solely to retain power, they are willing to trade their own populations futures away for their own retention of power. A very sick and depraved philosophy. But that is the nature of the abuse of power.

    http://www.baltimoresun.com/news/maryland/crime/bs-md-ci-citywide-ceasefire-20170803-story.html

    The people of Baltimore plead (I am wondering to whom they are pleading?) for just 72 hours without violence and murder in their city. That is how desperate the people have become, they can not see where the blame for this condition lies, in their own mirrors.

    http://www.wlsam.com/2017/08/04/emanuel-to-sue-feds-over-new-sanctuary-city-rules/

    The Democrat mayor of Chicago, another stellar example of a Democrat controlled city for many years, stellar if you are looking for murder, crime, poverty, corruption and high taxation. The mayor of Chicago, Rham Emanuel, a full blown Hillary disciple, refuses to cooperate with the Federal government because he supports the infestation of his “sanctuary” city with ILLEGAL immigrants. Where does the crime and murder of the tax payers in his city come from? I wonder?

    https://www.thetrace.org/2017/01/chicago-not-most-dangerous-city-america/

    St. Louis, another Democrat party exclusively controlled city for many, many years holds the proud distinction in what? The highest earnings per capita? NO. The friendliest city in America? NO. The most modern and efficient industrial production in the country? NO. They hold the distinction as the MURDER capitol of America. And notice the skin color of the individuals on the grave markers in the cover picture. All black or Hispanic.

    So stepping back and looking at the reality of the situation, why would any White, Black, Hispanic or any American in these cities ever vote for these very consistent results that their Democrat politicians have delivered year after year? All they have delivered has been crime, murder, corruption and modern slavery to their citizens. But they get to keep political control.

    These trends in our cities, just like in our national politics must change. The people must take by the political throats their representatives of both party’s and demand a different result other than crime, corruption and anti American policies that are essentially destroying us all as a people.

  • pzatchok

    Like I said a LONG time ago.

    Just double the size of Medicare/Medicaid and leave everything else alone.

    Medicaid/Medicare covers all pre existing conditions private insurance does not cover.

    I have other passive ideas to reduce insurance companies from dropping people.

  • wayne

    pzatchok-
    Have to disagree with you;

    Medicaid & Medicare are pure welfare programs, with Medicare being mandatory based on age.
    They do “cover” pre-existing conditions, which makes them by definition, welfare programs. If one isn’t insuring against actual risk, one doesn’t have insurance.
    (And there is a unlimited demand for healthcare services.)

  • wodun

    We can barely pay for Medicaid and Medicare, not sure why people think we can afford single customer healthcare.

  • pzatchok

    Wayne

    Of course its the welfare system of healthcare.

    But its either we care for those who can’t care for themselves with welfare, like the old and the handy capped or we do something like Obama care and subsidize their private insurance at HUGE HUGE premiums.
    Obama care wanted that but they also wanted to spread out that HUGE HUGE cost to everyone else other than the federal government. So now everyone just gets HUGE premiums.

    The only way to lower costs further is to set up a VA type of medical system for the low income general public.
    Insurance companies are just middlemen who skim profits off the top first and as you know the fastest way to lower the cost of anything is to cut out the middleman.

    And think about this.
    Exactly how much do you pay in Medcaid/Medicare tax? Its on your pay stub. Its pretty low actually.
    I would rather pay three times as much of that tax than pay these HUGE insurance premiums we are now.

  • wayne

    pzatchok-
    I do get where you’re coming from, but I just don’t agree.

    Just referencing “healthcare for poor people” generally–I have no problem with charity for the poor and we’ve historically had quite an infrastructure in the past, of more privately oriented solutions. And they were more locally/regionally based, rather than imposed by Washington.
    I’d put forth– the Fed government has become is too embedded into healthcare & health insurance starting with FDR, but more-so with LBJ.
    I just don’t think we can tinker with it at the margins & really “improve it.”
    Backing out of any of that, is no easy task, and it looks like the ACA will become a permanent fixture, (Bush gave us Medicare Part D, that’s no better.)
    I’m not opposed to a government back-stop on the truly needy. My preference would be it came from the States and not the feds. That aside, the true pool of Medicaid recipients should be 10-15 million, maximum. However, we have like 60 million on Medicaid, and that is up from 20 million or so under Bush. That is unsustainable.

    I just don’t get the desire to overhaul the entire private healthcare/health-insurance system, and screw up everyone else, just to “help” a relatively small percentage of our population.

    anyway–
    Good stuff. Complex situation.

    -tangentially, you might enjoy this, whether you agree wit it or not

    “Munger on Middlemen”
    http://www.econtalk.org/archives/2008/10/munger_on_middl.html

    Never underestimate the role of the hated “middle-man.” !

  • pzatchok

    Wayne
    “I just don’t get the desire to overhaul the entire private healthcare/health-insurance system, and screw up everyone else, just to “help” a relatively small percentage of our population.”

    Its a power grab by the socialists/communists.

    And there are still just as many people who have no healthcare.
    There are over 8 million people who took the tax return penalty than pay for insurance.
    Over 25 million who have no insurance at all.
    And 40 million plus who are drastically under insured due to rising costs.

    Insurance companies are making record amounts of profits and at the same time trying to drop the low premiums, the government paid for and thus regulated exchange premiums.

    Obamacare did nothing but make insurance companies huge amounts of cash and democrats votes. All by harming the middle class who actually pay the largest percentage of their income in insurance than anyone else.

    In the end it would have been cheaper faster and far more legal to just expand Medicare/Medicaid. They wouldn’t have had to go to the supreme court to raise that tax.
    But it wouldn’t have profited the insurance companies. So guess who wrote Obama care? The real people who profited, the insurance companies.

  • wayne

    pzatchok-
    I’m no special pleader for crony insurance companies. They drooled over having the government force us to buy their products. Unelected co-conspirators, for the most part.
    (And none of this really about helping poor people see a doctor. They just want to steal our money & tell us what to do.)

    I really don’t want the “government” acting as the middle-man. MA/MC have already distorted the market beyond comprehension, and the VA is already an example of an entirely closed government monopoly. (It’s their way or nothing, and they don’t care if you die in the process.)
    The right people lack the correct incentives to function properly. This is a direct result of years of endless intervention and tweaking, that could never have worked and never will.

    Why Intervention Persists
    Mises
    https://mises.org/library/why-intervention-persists

    “Authors of economics books, essays, articles, and political platforms demand interventionistic measures before they are taken, but once they have been imposed no one likes them. Then everyone—usually even the authorities responsible for them—call them insufficient and unsatisfactory. Generally the demand then arises for the replacement of unsatisfactory interventions by other, more suitable measures. And once the new demands have been met, the same scenario begins all over again. The universal desire for the interventionist system is matched by the rejection of all concrete measures of the interventionist policy.”

  • wayne

    -Highly recommend the “Munger on Middleman” podcast I referenced above.
    It’s an Econtalk episode hosted by Russ Roberts (from the recent evening pause it’s a wonderful loaf fame.) It’s good, not a bunch of econ-babble.

    Referencing the ACA; I believe, but don’t quote me on this, one of the regulations targets the “overhead expense” of insurance companies, along with the benefit-payout vs. premium-dollar-received ratio.
    (and yes, these companies currently make money over-all, but they lose on ACA specific policies.
    The left makes the claim they will “remove the greed factor in business, and run everything at-cost.”
    That dog just don’t hunt.

    anyway… again, Complex Topic.

  • wayne

    I would put forth; there’s no good reason why we couldn’t have a more competitive market in insurance. And a less centrally-controlled healthcare infrastructure.
    Incentives, consequences, choice, and options, however, are all missing. Our Overlord’s just continue to steal and lie to us, as they tighten the circle of liberty.

    On a more humorous note:

    Deer
    Allstate Mayhem
    https://youtu.be/nFpZflRUQWw
    (0:30)
    “….just make sure your 15-minute insurance, covers Deer.”

  • Garry

    Wayne wrote,

    Referencing the ACA; I believe, but don’t quote me on this, one of the regulations targets the ‘overhead expense’ of insurance companies, along with the benefit-payout vs. premium-dollar-received ratio.”

    This is one of the worst aspects of the law, and is an incentive to drive up costs.

    If I remember correctly, overhead expenses have to account for no more than 10 percent of revenue; the implied intention is that most of revenue should go towards medical expenses for the policy holder. Overhead includes salaries, and I believe profit.

    But how does this work in practice? Say that overhead expenses are $200 million, and amount paid out for medical expenses is $900 million. That simply won’t do; that greedy insurance company is spending too much on overhead.

    So what’s the solution? The insurance company simply doubles its payout to medical providers (to $1.8 billion), so that overhead is now limited to 10 percent of revenues! Oh, what a kind-hearted, socially responsible company it is!

    This resets the market rates for medical procedures, so the medical providers raise their costs not only with all insurers, but with all patients who don’t have health insurance (and for all those working slobs like myself who have insurance with high deductibles they haven’t reached yet).

    Yet another perverse outcome of trying to overturn the greedy aspects of capitalism.

  • wayne

    Garry–
    Good stuff.
    (I’m unclear on the specific regulations which is why I didn’t state them as factoids.)

    I thought the “overhead” restrictions were set at 15%, which in-theory would leave 85 cents per premium dollar for claims payment.
    But…. that 15% would have to cover not only overhead but their cost of capital, inflation, and profit.
    (And we can’t let them have any profit, now can we?)
    (And why is it OK, to order a specific industry to “only spend 15% on overhead?” When did that become legal or an “American” thing to do?)
    That’s rhetorical—Justice Robert’s decided it was magically OK to do it, to them.

    Again, I will shill for the “Munger on Middleman” Podcast I referenced above.

    They discuss (one of) the interventionists Master Plans– “learn how it’s done in the private-sector, copy it, but eliminate the profit motive, i.e. cut out the mythical “middleman.” Problem solved….or not.
    Insurance and healthcare are commodities (one could quibble on the margins) and under a free-market system the marginal profits will always be driven down. Everyone is operating within the same set of inputs/outputs, the only way to make profit is to drive down marginal costs, to innovate, to become more efficient, to create happy consumer’s that voluntarily buy what they want in the way of insurance.
    Without Profit, their is no incentive whatsoever to reduce costs. And without an accurate pricing mechanism, nobody knows what the true costs actually are.

    Hmmm– anyone here think the Post Office (or the VA) is a leader in Innovation and cutting costs year-over-year?? Hardly.

    I just paid my auto-insurance. It does not provide free gasoline or oil-changes to me. In fact, they don’t want to hear from me unless I’ve had an accident. They do not want to pay me to have my car checked every month, or give me a Gas-Card which allows me to buy gas for a “low co-pay.”

    I have no problem with a State sponsored high-risk pool that is backstopped to some degree, but the number of those folks is miniscule compared to everyone else.

    Again, I would ask– for what reason are we upending the entire healthcare insurance and healthcare delivery industry, just to “cover” 10-15 million people??
    -‘cuz its not about health insurance, it’s about socialism.

  • Garry

    Wayne, all good stuff.

    It may be 15%; I’m going off my (often faulty) memory. But regardless of the amount,it’s an ill-conceived idea.

    Many things marxists propose are restatements of the following:

    “If we could only get rid of human nature, things would be easy.”

    “I love humanity, it’s people I can’t stand.”

  • wayne

    Garry-
    (good stuff.)
    the actual percentage aside– Yes, it’s a completely unproductive Idea, has never worked, does not work, and I would put forth, it could never work in the real world.

    Tom Waits –
    “What’s he building in there?”
    https://youtu.be/DDBHscMTECw
    (5:15)

  • Edward

    pzatchok wrote: “But its either we care for those who can’t care for themselves with welfare, like the old and the handy capped or we do something like Obama care and subsidize their private insurance at HUGE HUGE premiums.

    The system that we had before Obamacare worked well enough. Each state took care of those who couldn’t care for themselves without creating huge insurance premiums or outrageous Canada-like prices and taxes. Or socialized-medicine-like wait times. Nor did we have a messed up work-ethic. Nor did we have to violate religious convictions. We didn’t even have to direct people and companies as to how to spend their own money, and we didn’t limit the choice of healthcare coverage to one (although Obamacare allows for four different financial plans, so it looks like a choice). With the added benefit that the welfare was in the hands of the states, where it belongs, not at the expense of the insurance companies, where it does not belong.

    Even with healthcare, one size does not fit all. In fact, just as with clothes, it fits very few, including most those very few, poor, preexisting-condition people whom it was supposed to fit.

    pzatchok wrote: “And think about this. Exactly how much do you pay in Medcaid/Medicare tax? Its on your pay stub. Its pretty low actually. I would rather pay three times as much of that tax than pay these HUGE insurance premiums we are now.

    That may be the right price, for you, but the service is so bad that many, MANY people buy supplemental insurance so that they can get good care in a timely manner.

    pzatchok wrote: “And there are still just as many people who have no healthcare. There are over 8 million people who took the tax return penalty than pay for insurance. Over 25 million who have no insurance at all. And 40 million plus who are drastically under insured due to rising costs.

    I am one of those who was insured before Obamacare and now am a scofflaw, not buying this imposed burden. The price went from being barely tolerable for the benefits offered to being far higher than the benefit of coverage. I am far better off without the coverage than paying for a coverage that does not begin until I spend far more than I have ever spent in a single year, or in a single decade (actually, it is more than I spent in any four decades, but who’s counting?).

    pzatchok wrote: “Insurance companies are making record amounts of profits and at the same time trying to drop the low premiums, the government paid for and thus regulated exchange premiums. Obamacare did nothing but make insurance companies huge amounts of cash …

    Sounds like yet another good reason to return to the previous system of healthcare.

    pzatchok wrote: “In the end it would have been cheaper faster and far more legal to just expand Medicare/Medicaid.

    Unless you are looking for, you know, quality in your health care. Then that would not be such a good idea.

    wayne asked: “Hmmm– anyone here think the Post Office (or the VA) is a leader in Innovation and cutting costs year-over-year??

    No. The leaders in innovation were companies such as Fed Ex, UPS, and Emory; the post office tends to borrow their successful innovated services. However, the VA does innovative work on prostheses and trauma recovery, but I don’t know if they are leaders in such innovation.

    To all:
    While we are on the topic, a centrally-controlled healthcare system such as Obamacare, Canada’s system, or Britain’s NHS can lead to the following foolish, Grecian/Roman-like ideas:
    http://www.telegraph.co.uk/news/health/news/9113394/Killing-babies-no-different-from-abortion-experts-say.html

    Fortunately, this idea never came to pass (with the “only” exception of Charlie Gard) because choosing death over a possible cure or a life of disability is never the right choice. Unless your civilization is so poor that it cannot care for the weak — thus the usual choice (called exposure) of the ancient Greeks and the Roman Empire.

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