by Megan McArdle · February 16, 2017
Yet more bad news for Obamacare this week: Molina Healthcare lost $110 million on the exchanges last year, and the CEO told investors, “There are simply too many unknowns with the marketplace program to commit to our participation beyond 2017.”
At first glance, it’s hard to see why this piece of news is worth worrying about. UnitedHealth recently projected several times those losses, and it’s a bigger player on the exchanges. Why spend so much time looking at one modest-size insurer?
Because Molina is one of the companies that has been repeatedly pointed to, by virtually every health-care-policy wonk in the business, as one of the “bright spots” on the exchanges. Molina is a company that specializes in covering poor people. Before Obamacare, they were a sizable player in the “Medicaid managed care” model, and it seemed like the expertise they’d thusly acquired was allowing them to design the sort of plans that actually made money on the exchanges. Which is to say bare bones plans, not fancy but adequate. Apparently, that’s no longer a money-maker, at least for Molina.
This isn’t necessarily the pattern we’ve seen with other insurers. Molina seems to have made money until it was forced to pay into a fund designed to transfer money from insurers that ended up with an unusually healthy patient pool, to those who got stuck with the sicker patients. Those losses were partially offset by lower medical costs than they expected, which is certainly good news. But it’s not great news. Lower-than-expected costs can be from the system working well, or they can simply come from the fact that you happened to get a healthier insurance pool. If the government makes you give the latter gains back, and more, then you’re still not going to be profitable. And insurers that aren’t profitable over the long term aren’t going to stick around.
Nor can you fix the problem by adjusting the transfer fund. Those losses are occurring somewhere in the market; someone has to pay for the care. If you got rid of Obamacare’s risk transfer provisions, those insurers would lose more money, and exit the market, and the patients would end up with some other insurer. Who would then lose a bunch of money on them. Unless the insurance market is profitable in aggregate, the exchanges are not going to stabilize.
Molina’s losses suggest that instead of stabilizing, the exchanges are getting worse. There is no way to fix Obamacare without fixing the pool so that younger, healthier people buy insurance.
Democrats had six years to come up with a way to do that (or perhaps I should say, a way to do that that could actually get through Congress without hordes of angry voters burning their representatives in effigy). They failed. Now Republicans are taking their shot, and so far at least, they don’t seem any more on target than Democrats were.
The life expectancy of the individual market for health insurance is not looking good.