Health Care

Obamacare Exchanges Crumble

August 25, 2016

Trent England

This week, Tennessee’s Insurance Commissioner warned that her state’s health insurance exchange is “very near collapse.” Illinois approved premium hikes averaging 45% for 2017. And across the country, Arizona’s Pinal County is now set to become the first “Obamacare ghost town” with zero plans offered. About 9,700 Pinal County residents purchase insurance on the exchange this year; all will lose their current plans and many will lose large federal subsidies even if they are able to buy insurance some other way.

Oklahoma is not far behind. Jonathan Small noted last week in The Journal Record that next year we will “join the ranks of states with just a single company ‘competing’ in the health insurance exchange.” At least Oklahomans can thank the legislature for standing up against the Oklahoma Health Care Authority’s “rebalancing” proposal that would have expanded Obamacare, in part, by pushing some pregnant women and children into the failing exchange.

In related news, The Weekly Standard reports that the Obama Administration’s website has finally expunged all reminders of the President’s emphatic promise: “If you have insurance that you like, then you will be able to keep that insurance. If you've got a doctor that you like, you will be able to keep your doctor.”

What happened? Why were Obama’s critics so completely right? It isn’t that complicated. The trouble is, the Obamacare law outlaws real health insurance.

Words mean things, and the word “insurance” is not a synonym for “all-you-can-eat buffet.” Just like car insurance does not pay for the car wash, or even for rotating the tires or changing the oil, real health insurance covers major, unforeseen health care needs. And just like drivers who get lots of tickets or are simply young and male pay more for car insurance, people who make poor health choices or who are otherwise highly likely to cost a lot of money pay higher premiums in a real insurance market. If an insurance company cannot sell real insurance and cannot price that insurance in a way that makes sense, that company is not going to stay in business.

The only company that can survive in such an environment is a monopoly, because it can increase prices and reduce quality without fear of consumers going anywhere else. But, of course, monopolies are illegal. And while the Obama Department of Justice may not be interested in Hillary Clinton’s “extremely careless” handling of top secret information, it has become zealous in opposition to insurance companies trying to merge in order to stay in business.

Now no one need shed a tear for insurance companies, since they largely supported and even helped write the Obamacare law. In fact, these big businesses were banking on bailouts that were written, at least in part, into Obamacare itself. (Think about that: Obamacare supporters had so much faith in their product they pre-programmed bailouts into it.) Of course, the unpopularity of the law and the way it was passed propelled Republicans into control of Congress. And one thing Republicans in Congress did was to block the Obamacare bailouts.

The Mercatus Center’s Brian Blase, a guest on today’s Trent England Show, predicts that Obamacare is in for radical changes no matter who wins in November. Of course, that could mean more government control (along with higher costs, fewer choices, and more debt) or greater consumer choice (leading to competition that drives costs down, quality up, and innovation forward). Brian talked this morning about returning to a real insurance market, giving Americans choices and allowing competition, while providing “high risk pools” so that people with preexisting conditions also have coverage.