Obamacare “Death Spiral” Looms As Co-Op Losses Mount

Saturday, September 24, 2016
By Paul Martin

by Tyler Durden
ZeroHedge.com
Sep 24, 2016

Failing insurers. Rising premiums. Financial losses. As Bloomberg details, the deteriorating Obamacare market that the health insurance industry feared is here.

As concerns about the survival of the Affordable Care Act’s markets intensify, Bloomberg notes the role of nonprofit “co-op” health insurers — meant to broaden choices under the law — has gained prominence.

Most of the original 23 co-ops have failed, dumping more than 800,000 members back onto the ACA markets over the last two years.

Many of those thousands of people were sicker and more expensive than the remaining insurers expected — and they’re hurting results. With more of the nonprofits on the brink of folding, the situation for the remaining providers looks dire. Anthem Inc., for example, is facing an estimated $300 million in losses on its exchange business for individual plans this year, after turning a profit in 2014 and almost breaking even on the program in 2015, according to the company.

“These co-ops have attracted, we think, disproportionately high health-care utilizers,” Gary Taylor, an analyst with JPMorgan who follows the industry, said in a telephone interview. Their former members “are now enrolled in these for-profit health plans. That’s been a factor driving the deterioration in their profitability.”

In a death spiral:

As options for coverage shrink, insurers attract increasingly sick patients and suffer losses.

That forces them to raise rates, driving away healthy, profitable customers.

Facing more losses, they raise rates again, causing more healthy people to leave, and so on — until all that’s left are high premiums and a small pool of the unwell.

The Rest…HERE

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