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June 2012
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BINARY America at crossroad on health care future


Aetna announced last week it will complete its exit from the Obamacare insurance market next year amid continuing steep losses.

This has by now become a familiar refrain from health insurers. Aetna says it expects to lose $200 million on Obamacare policies this year due to a continuing unfavorable patient mix. This comes atop $700 million of losses racked up from 2014 through last year.

Aetna ranks fourth among the nation's health insurers, just ahead of Louisville-based Humana. This year Aetna pulled out of 11 of 15 Affordable Care Act markets it had served. This reduced the company's exposure from 964,000 Obamacare policyholders last year to 255,000 today. Still, Aetna cannot make a go of it.

There is a side of us that has little sympathy for the health insurers. Many of them went along with the political effort to create Obamacare in hopes that the greater volume of policies sold under the ACA would make up for the declining profit margins the law was certain to produce.

They should have known better, particularly with any law that assured coverage of pre-existing conditions. There was a history of disaster after all with many similar efforts at the state level in the recent past.

We continue to find it remarkable how closely the failure of the ACA tracks Kentucky's own failed program in 1994. When Kentucky's law was passed more than 40 companies were selling health insurance coverage in the commonwealth. After the law took effect that number fell to two, with one of those only selling coverage in certain parts of the state.

The same is happening nationally. Already people in roughly one-third of the nation's counties have only one insurer to buy coverage from on Obamacare exchanges. Competition this is not, and soaring premiums reflect that.

Obamacare is a lost cause. So is any Republican attempt to replace it if it involves mandatory coverage of pre-existing conditions.

There are only two ways to deal with pre-existing conditions without incurring ruin.

There is the pre-Obamacare market solution, which left coverage of pre-existing conditions to government-subsidized high risk pools, which themselves were no bargain. That system does create incentive for healthy people to buy coverage however, since they generally cannot be booted if they have coverage and then fall seriously ill.

The economics of that model are similar to a mortgage. People who maintain coverage longterm pay more than they receive in services when they are younger and healthier, but benefit when health care needs increase as they age.

The only other solution is the government solution. It would expand Medicare to everyone. This would be paid for by increasing withholdings from every dollar of every American worker's paycheck. It would be mandatory universal coverage under a different guise. The government would decide who gets what services and at what price.

The choice is really binary. Obamacare and the wasteland of failed state plans prove there is no middle ground. The government solution scares us for many reasons. But if Americans ultimately demand the same coverage terms regardless of health, the government solution is the one we are going to get.

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