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June 2012
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TEETERING Reports show finances of ACA not working

The news about the Affordable Care Act - "Obamacare" in most people's daily lexicon - got even worse over the weekend. Two stories, one in the weekend Wall Street Journal and a second by the Associated Press that appeared in Sunday newspapers around the nation, suggested that the worst fears of ACA supporters are coming true - specifically, the financial assumptions of the program are faltering.

The Wall Street Journal article focused on the growing number of health insurance companies that now report they will book losses from their participation in ACA exchanges in 2014. Cigna is the latest insurer to announce it will lose money because of smaller-than-expected enrollments and, more seriously, a skew toward older enrollees.

Cigna Chief Executive David Cordani said the insurer is seeing "a much smaller book of business than anyone anticipated" and one that is, on average, older than expected. Specifically, he said the company projects enrolling 50,000 to 60,000 people, which is less than half the number it was counting on in 2014.

Cordani's comments came on the heels of similar announcements earlier in the week by Humana Inc. and Aetna Inc., both of which indicated they expect to lose money from their participation in the exchanges this year.

The trend is not only bad news for the ACA. It's bad news for people in the individual health insurance market. As a Barclay's analyst says in the WSJ article, "If the trend continues, the health plans are not in the business of losing money. They will either put through significant rate increases or exit the market."

The article says Aetna has already told industry analysts that it will seek premium increases of more than 10 percent in its ACA plans in 2015.

The AP article meanwhile talks of growing nervousness in the 14 states that operate their own health insurance exchanges, currently with substantial federal support. Kentucky received $254 million in federal money to create and operate its exchange - fourth-highest among those 14 states.

Under the terms of the ACA, all 14 of these states are supposed to take over funding of their exchanges in 2015. In theory, the exchanges are supposed to pay for themselves by that time through policy surcharges. However some of those states (Kentucky was not specifically discussed) now say lower-than-expected enrollments have them fearful their exchanges will be insolvent.

Because not enough people are enrolling, some states are hording federal grant money to help them get through in 2015 while others are discussing staff reductions and imposing even higher surcharges on policies sold on the exchanges, a cost that will ultimately show up in premiums.

These are of course temporary solutions. Regardless of what one thinks of the politics of the ACA, it does appear to be shaping up as the financial train wreck many have predicted. It is not covering the number of people that was intended. It is dislocating millions more from policies they were satisfied with. It is poised to drive premiums in the individual market up by double digits in 2015. And the promise to states that their exchanges would pay their own way in 2015 is coming up short.

No one would seriously argue that there have not been problems in the health care market in years past or that we as a nation cannot do a better job of addressing how to help people with pre-existing conditions or financial challenges. But the ACA clearly is not the answer. It is doing far more harm than good.

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