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June 30, 2016

ACA Insurers Are Looking for a Taxpayer Bailout

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The Fiscal Times cites a working paper by Brian Blase, Doug Badger, Edmund F. Haislmaier, and Seth J. Chandler on the ACA's large losses in the individual market, saying:

Thus far, insurers still claim to have confidence in the ACA model – at least, those who have not pulled out of their markets altogether. However, massive annual premium increases four years into the program demonstrate the instability and unpredictability of the Obamacare model, and a new study from Mercatus explains why.

The claims costs for qualified health plans (QHPs) within the Obamacare markets far outstripped those from non-QHP individual plan customers grandfathered on their existing plans – by 93 percent. They also outstripped costs in group QHP plans by 24 percent. In order to break even without reinsurance subsidies (separate from the risk-corridor indemnification funds), premiums would need to have been 31 percent higher on average for individual QHPs.

The main problem was that younger and healthier people opted out of the markets, skewing the risk pools toward consumers with much higher utilization rates – as Obamacare opponents predicted all along. With another round of sky-high premium increases coming, that problem will only get worse, the study predicts.

“[H]igher premiums will further reduce the attractiveness of individual QHPs to younger and healthier enrollees, resulting in a market that will appeal primarily to lower-income individuals who receive large subsidies and to people with expensive health conditions,” it concludes. “To avoid such an outcome, it is increasingly likely that the individual insurance market changes made by the ACA will have to be revised or reversed.”

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