Humana, the nation’s fourth-biggest health insurer (per the Fortune 500), is bailing out of Obamacare. In a press release, the health insurer announced that it “has decided that it cannot continue to offer [insurance] coverage for 2018” through the Obamacare exchanges because, “following the 2017 open enrollment period, Humana is seeing further signs of an unbalanced risk pool.”
Humana’s conclusion provides further evidence that Obamacare is in a slow-motion death spiral. The question is whether the preferred course of action is now to move quickly, with partial repeal, or to move strategically, with the determination to achieve full repeal.
The “unbalanced risk pool” in Obamacare will keep deteriorating, because Obamacare robs from the young and the healthy and gives to the older and the sicker. (It also robs from the middle class and gives to the near-poor.)
Consider this example: Obamacare’s taxpayer-funded subsidies — its direct outlays to insurance companies — are greatly skewed toward those who are older. Take a single 24-year-old and a single 64-year-old, each making $35,000 a year. Based on the U.S. average, the 24-year-old’s premiums (according to Kaiser’s health calculator) for the second-cheapest “silver” plan (Obamacare’s benchmark plan) are $3,387 a year, and the 64-year-old’s are $10,160 — three times as much. That gap would naturally be much larger, but Obamacare bans insurers from charging younger people less than one-third what they charge older people.
If that weren’t bad enough, the 64-year-old gets a $6,824 subsidy, while the 24-year-old gets just a $51 subsidy ($4.25 a month) — less than 1 percent as much. As a result, each ends up having to pay exactly the same $3,336 per year of their own money. No wonder the 24-year-old is likely to forgo insurance and pay his or her $875 individual-mandate penalty instead.
Another source of Obamacare's slow-motion death spiral is the hubristic manner in which it went about protecting those with preexisting conditions — namely, by undermining the whole idea of "insurance." (Recent polling by McLaughlin & Associates, commissioned by the 91 Institute, found that Americans do want preexisting-conditions protections, but they do not want Obamacare's premium-spiking protections.)
For centuries, insurance has been something that one must buy before the thing happens that one is insuring against. Under Obamacare, this notion is effectively banned. Insurers must cover anyone — at the same price — which is a lot like letting people buy homeowners insurance (at the same price) when their house is on fire, or life insurance from their deathbed.
Predictably, the healthy game this system, and Obamacare's exchanges are disproportionately filled with sick people who either need ongoing care or else need short-term care and will dump their plan once they've gotten the care they need. No wonder premiums in the individual market have spiked 40 percent over the past two years under Obamacare.
The Trump administration is trying to address some of these problems, having just proposed new regulations to make it harder for people to game the system. (Obamacare's 2,400 pages of federal largess are full of "the Secretary shall" language, so new Health and Human Services Secretary Tom Price has wide statutory authority to issue new regulations.) Among other things, these regulations would shorten Obamacare's open-enrollment period by half (from three to 1.5 months), put the burden on those who want to enroll at other times to provide proof that they're actually eligible for special enrollment, and (doesn't this sound draconian?) permit insurers to make potential customers pay their unpaid insurance bills before letting them enroll for a new year of coverage. (This is an attempt to crack down on those who pay premiums for nine months and then take advantage of Obamacare's three-month "grace period" for those who stop paying.) This is commonsense stuff that will help stabilize the individual market under Obamacare — to a degree.
But it's ultimately like trying to give a fresh coat of paint to an ugly house built on a bad foundation by a shoddy builder using plans from an incompetent architect. The ultimate solution isn't new paint; it's well-placed dynamite followed by a new building project.
The question is whether it's best to bring out the explosives before the rebuilding plans have been approved. This is especially true because the immediate demolition project being contemplated would only partially destroy the existing structure, and people would still have to live in it.
Less metaphorically, the "repeal" plan being discussed — the one passed in 2015 via the budget-reconciliation process and vetoed by then-President Obama — would not repeal Obamacare's "community rating" mandate, which undermines the core notion of "insurance" (and is the main source of Obamacare's skyrocketing premiums); would not repeal Obamacare's "guaranteed issue" mandate, which gives "community rating" teeth; and would ostensibly repeal Obamacare's subsidies to insurance companies and its Medicaid expansion, but would keep all that spending flowing during a "transition period."
The allure of such partial repeal therefore largely depends on how much faith one has that Republicans would subsequently either: A) pass an alternative, or B) not vote to keep that Obamacare spending flowing if they've failed to pass an alternative by the time the spending is set to expire. In other words, partial repeal could potentially lead to many more years of sky-high Obamacare premiums and free-flowing Obamacare spending, even as many of Obamacare's revenue streams would have been closed off. Obamacare could become even more of a deficit bomb.
Moreover, deep-pocketed business interests would support a repeal-and-replacement package in order to get rid of Obamacare's taxes. It's worth asking whether they would support or oppose a replacement if they get what they want up front, via partial repeal.
Once the plans for a new Republican structure are in place, full repeal — or certainly full repeal of Obamacare's spending provisions — is possible. Without such plans, only partial repeal is possible — and partial repeal could mean letting a crippled version of Obamacare limp along for years, with just as much ability to spend money and raise premiums as ever.
Obamacare is clearly unraveling. The real question is what course of action would most likely lead to full repeal — the only result that should be acceptable to lovers of limited government and liberty.