Insurance Commissioner: Obamacare is 'Very Near Collapse' in My State

Guy Benson
|
Posted: Aug 29, 2016 10:25 AM
Insurance Commissioner: Obamacare is 'Very Near Collapse' in My State

As we reported last week, one top industry expert believes Obamacare is in danger of being within one year of collapse. Several economists are sounding the alarm over new evidence of the dreaded insurance "death spiral" -- which we'll return to momentarily.  Now here is Tennessee's insurance commissioner pointedly declining to sugarcoat the increasingly dire status of Democrats' grand healthcare experiment in her state:

Tennessee's insurance regulator proclaimed the state's Obamacare exchange "very near collapse" Tuesday, after signing off on hefty premium hikes in an extraordinary bid to keep the program afloat. Her remarks largely overshadowing the dramatic premium increases, Commissioner Julie Mix McPeak thrust the issue of preserving competition into the spotlight at a moment when states around the country are grappling with dwindling numbers of insurers willing to sell on the exchange. The rate approvals, while a tough decision, were necessary to ensure healthcare options in every part of Tennessee when open enrollment begins in November, said McPeak, commissioner of the Tennessee Department of Commerce and Insurance. BlueCross BlueShield of Tennessee is the only insurer to sell statewide and there was the possibility that Cigna and Humana would reduce their footprints or leave the market altogether...“I would characterize the exchange market in Tennessee as very near collapse ... and that all of our efforts are really focused on making sure we have as many writers in the areas as possible, knowing that might be one," McPeak told The Tennessean. "I’m doing everything I can to prevent a situation where that turns to zero.”

An important note: For those who've been loosely following this law's many travails since its 2010 passage, it's possible to become inured to "implosion" headlines and urgent warnings.  Haven't a bunch of these exchanges failed already?  What's new about this?   First, a large percentage of Obamacare co-ops have totally collapsed and closed up shop.  These are taxpayer funded non-profit alternatives constructed within the law with the goal of offering consumers options outside of the private market exchanges.  Second, there were also high-profile face-plants in the creation stage of state-based exchanges, most notoriously Oregon's meltdown.  Maryland was another big one.  When those exchanges went down the tubes technologically, state leaders shifted over to the federal exchange at Healthcare.gov.  What we're seeing in Tennessee (which is on the federal exchange) is a third phenomenon: The costs and losses caused by the law are destroying the market itself.  This isn't a co-op disappearing or a state-funded website crashing.  It's a statewide individual health insurance market evaporating.  Why?  Because providers are pulling out, unable to sustain the associated financial beating any longer.  

Now, with fewer choices risking the departure of more insurers, the state is approving steep rate increases to try to keep the remaining players solvent.  Of course, substantially higher rates will have the direct effect of scaring away younger, healthier consumers at a faster clip; after all, if they get sick or hurt, the law mandates that they be able to obtain "insurance" with their new pre-existing condition -- at a comparable rate to everyone else, to boot.  This is the slow, aforementioned "death spiral" in action.  This effect is playing out across the nation, with millions of Americans facing a contracting list of options, especially those living in the roughly one-third of the country where there's only one "choice" left.  You'll also notice that the only statewide insurer left in Tennessee is Blue Cross Blue Shield, an industry giant that has not yet followed in several large competitors' footsteps and withdrawn from Obamacare fairly comprehensively.  Is that shoe getting ready to drop?  Back to the story:

Chattanooga-based BCBST, the only insurer that's sold statewide in the first three years of the federal exchange, is estimating that, by the end of 2016, it will have lost close to $500 million in three years. Such losses are unsustainable, said Roy Vaughn, chief communications officer of BCBST. The insurer, which has previously underscored its support for the individual market, is still weighing what its presence in 2017 will look like. At this point in the process, the insurer only has to notify the state if it decides to make changes to where it will sell plans, McPeak said. It’s too late for another insurer to come onto the 2017 market. “We agree with the assessment of the ACA marketplace in Tennessee. We appreciate the support of our request to close the gap between our rates and medical expenses for ACA marketplace plans. Beyond rates as we’ve discussed with the (TDCI), we continue to have concerns about uncertainty with the ACA at the federal level," Vaughn said to The Tennessean. "Due to these concerns, we are keeping all of our options open at this point about participating in the 2017 marketplace. We anticipate making a final decision in mid-September.”

Trouble ahead.  CBS News, meanwhile, took a look at options for new "Obamacare orphans," who've been displaced by the law's ongoing turbulence and disruptions.  Yet again, Americans are discovering that contra the president, they can't necessarily keep their plan.  CBS tells this group to get ready to open their wallets:

Prepare to incur out-of-pocket health care costs. They are rising for just about everybody. If you find out from your doctor you’ll need to be going out of network to continue care, try to estimate how much more that will cost you in terms of higher premiums for a flexible plan and higher co-pays. Also, take a look at the medicines you take. Will those still be covered by your limited choice of plans? If not, how much will you be paying for prescriptions? Finally, with fewer choices you may need to move to a higher deductible plan, again costing you more out-of-pocket. Budgeting now for these costs can help make the coming year’s health care costs less of a surprise.

The "Affordable" Care Act, ladies and gentlemen.  I'll leave you with another piece of negative Obamacare news from yet another health insurance titan, followed by a political observation that could have an impact on how some races turn out this fall -- particularly with some of the finalized rate hikes scheduled to be rolled out just before the election:

One of the country’s largest insurance companies is now expected to lose money this year after emerging as one of the few insurers that made money on Obamacare’s exchange business early on. Anthem, one of the country’s five largest insurers, was projected to be successful in its business on Obamacare exchanges earlier this year. But last week, the company announced it’s expecting to see “mid-single-digit” losses on coverage sold on Obamacare’s exchanges. Joseph Swedish, Anthem’s CEO, told investors on a conference call it experienced higher medical costs than originally anticipated and would be looking to raise premiums substantially to make up for the losses...Swedish also said Anthem is going to be making “accurate business decisions going into 2017 and beyond regarding our continued engagement on a broad scale in the public exchange space.” Anthem’s participation outweighed that of other large insurers selling on Obamacare’s exchanges. With 923,000 exchange enrollees, the company sold coverage in 14 states.