March 23 marked the sixth anniversary of the passage of the Affordable Care Act (ACA), legislation that was promised to provide millions of Americans with affordable health insurance they otherwise couldn’t get while improving the quality of care for those who already had health insurance. One of the most ambitious aspects of ACA was creation of the health insurance marketplaces, which proponents of the law said would increase market competition and lead to lower costs for consumers and insurers.
A new report by Edmund Haislmaier, a senior research fellow for the Center for Health Policy Studies at The Heritage Foundation, shows ACA has in fact limited consumers’ health insurance options by driving numerous insurers out of the Obamacare marketplace. According to Haislmaier, there are now only 287 “exchange-participating insurers,” down from 307 in 2015 and significantly less than the 395 insurers Haislmaier says were in operation in the 50 states and Washington, DC in 2013, only one year prior to the opening of the ACA health insurance marketplace.
Haislmaier also says 22 states and Washington, DC, representing 45 percent of all states, now have fewer health insurance providers offering plans than they did just one year ago. Only 10 states have managed to increase the number of insurers in their health insurance marketplaces.
Among the 45 exchange insurer departures, 31 were “voluntary exits,” and 21 of those resulted from insurers pulling completely out of all ACA exchanges.
The primary reason insurers are leaving Obamacare exchanges is cost. ACA provisions—notably the individual mandate, the requirement insurers must cover pre-existing conditions, and coverage requirements—are leading to higher enrollment rates for more expensive, traditionally uninsured Americans without increasing the pool of younger, healthier health insurance consumers, many of whom are finding Obamacare too expensive.
The so-called Obamacare “risk corridor” was supposed to mitigate the potential harm health insurers knew they may have to endure when the Affordable Care Act was first passed into law. To help offset some of the costs associated with adding millions of new, relatively unhealthy people into the health insurance marketplace, the federal government pledged as part of the ACA to redistribute wealth to failing health insurance providers losing their shirts on the Obamacare insurance exchanges from insurers who were making money.
Under the risk corridor provisions, “[i]f an insurer’s actual claims in 2014 are at least 3% greater than the claims projected when the insurer set 2014 rates, the government must reimburse the insurer for half of the excess,” wrote Louise Radnofsky and Jennifer Corbett Dooren for The Wall Street Journal. “If actual claims jump 8% beyond projected claims, the government covers 80% of the excess.”
This plan, which was supposed to last through 2016, ended abruptly after congressional Republicans, led in part by Sen. Marco Rubio (R-FL), put provisions in the two most recent spending bills, passed in 2014 and 2015, to effectively make it impossible to shift needed funds from other sources to the fund used to pay insurers.
As a result of all these developments, many Americans are choosing to avoid the Obamacare exchanges entirely. The Wall Street Journal reports new sales figures show many people are opting to enroll in short-term health insurance policies, which are much cheaper and don’t satisfy ACA’s individual health insurance mandate, instead of enrolling in a much more expensive Obamacare plan. Even with the added cost of having to pay the ACA fine for not having proper health insurance, the total cost of being insured is much lower going this route. According to EHealth, the number of people applying on its for short-term health insurance policies in 2015 was double the number who applied in 2013, according to The Wall Street Journal. Similarly, “HealthMarkets Inc., a national insurance agency, said short-term sales in 2015 were about 150% higher than in 2013.”
Making matters even worse, health care costs continue to rise across the nation. Writing for the American Enterprise Institute, Ramesh Ponnuru says despite claims made by the Obama administration of slowing health care cost increases, “The most recent data we have show that health spending in 2014 grew at the fastest rate since 2007,” wrote Ponnuru. “That might be expected in a year when many of the law’s subsidies started flowing. But the Centers for Medicare and Medicaid Services project that the annual rate of growth of national health spending will keep rising over the next five years and then level off a bit—at a rate higher than we saw in 2008 or 2009.”
Rather than take massive losses resulting from rising health care costs and the Affordable Care Act’s anti-business regulations—as UnitedHealth did in 2015, when it lost nearly $475 million—insurers are leaving the Obamacare marketplaces for greener pastures, greatly limiting the number of quality health insurance plans available to consumers in ACA exchanges.
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