Thursday, September 10, 2020

Most Obamacare health insurance co-ops shut down

Fortune article reports that soon only 3 of the 26 "co-ops" created will remain. The rest were or will be shut down due to financial failure. I suspect the federally-run "marketplace,", is not one of the 26. It is not one of the 3.

A major feature of Obamacare was health insurance "co-ops" or "exchanges" or "marketplaces" where people could purchase subsidized health insurance. The buyer could not be denied coverage for health-related reasons and obtain a policy from a private health insurance company. The health insurance company is subsidized by government. The buyer might also get a subsidy from the federal government to help pay the premium. 

Premium amounts could not be based on pre-existing conditions, health status, claims history, duration of coverage, gender, or occupation. They could only vary by age, smoker/nonsmoker, and geographical region. More details are here.

Due to the large majority of working people getting health insurance via their employers, the individual health insurance market for people less than age 65 is small. For this reason alone, it is difficult for an insurer to charge premiums high enough to cover claims, even with being able to (1) not accept higher risks and/or (2) charging higher premiums to higher risk people. Also, if a person can pay a smaller premium by passing a health exam given by an insurer off the exchange, why would that person buy on the exchange? The effect is that only higher risk persons buy on the exchange. Adding to the problem by outlawing #1 and #2 and an inadequate government subsidy make it even more financially difficult for the insurer, and the result is Obamacare "exchanges." That is what health insurers face on the "exchanges." It is a recipe for financial failure.

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