Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

Market Insanity

Obamacare Collapse Might be Imminent

Obamacare might be far closer to total failure and complete collapse than is commonly believed. Some great reporting in Politico’s Agenda has exposed serious defects that may bring the system; set up by the Affordable Care Act or ACA, crashing down in the near future.

A McKinsey analysis revealed that one of Obamacare’s key components; the health care exchange system is a complete failure, Politico’s Paul Demko reported. Premiums are skyrocketing, private insurers are fleeing the system and choices are limited.

The exchanges are not working because of three major miscalculations made by the ACA’s authors. The system’s designers expected three things to occur that did not happen, Demko observed. First they expected large numbers of employers to stop offering health insurance; second they predicted large numbers of healthy young people buy policies through the exchanges, and third they hoped that enough healthy people would buy policies to cover the claims from those in poor condition.

None of that happened; instead insurers are losing money because the stampede of healthy young policyholders the designers expected never occurred. Instead many Obamacare exchanges are very close to collapse because there is not enough money to cover claims.

Only older and sicker people bought policies while the young and healthy avoided the exchanges like the plague. To make matters worse, few companies stopped offering health insurance, meaning the huge market for the policies the architects expected never materialized.

Numbers Prove the Obamacare Exchanges are a Disaster

Numbers uncovered by McKinsey and Politico indicate that the Obamacare Exchanges are a slow moving disaster that is headed for collapse. Highlights of the growing catastrophe include:

  • Blue Cross Blue Shield of North Carolina lost more than $400 million on the Obamacare policies it issued in 2014 and 2015.


  • Nationwide insurers lost $2.7 billion on Obamacare exchange policies in 2014, McKinsey reported.


  • 70% of the carriers participating in Obamacare sustained losses.


  • When Politico reviewed 2015 financial findings for 100 Obamacare plans, it found less than 25% of them were able to cover the costs of policies written for the exchanges.


  • Around 40% of the plans reviewed by Politico had medical costs that exceeded the premiums taken in.


  • The rate of Obamacare losses might have doubled in 2015, according to a McKinsey estimate.


  • One insurer, UnitedHealth Group (NYSE: UNH); expects to lose $650 million in the Obamacare business this year.


  • Not surprisingly UnitedHealth, the nation’s largest health insurance provider is getting out of the Obamacare business in most states.


  • Two thirds of the 23 nonprofit health plans set up to offer Obamacare insurance through the exchanges have collapsed because of red ink.


  • The largest Obamacare plan provider in Texas wants to raise rates by 60% next year.


  • Aetna; one of two private Obamacare plan providers left in North Carolina, wants to raise rates in the state by 25%.


  • Blue Cross Blue Shield of North Carolina’s Obamacare losses equaled 103% of the profits it made on the plans.


  • Aetna’s losses in North Carolina equaled 104% of the money it made.


  • Some of the experts Politco talked to said the Obamacare exchanges are in a “death spiral” of skyrocketing costs and declining competition.


  • Some counties in North Carolina might have no Obamacare plans available because Blue Cross Blue Shield is considering getting out of the business.


  • One Obamacare provider in New York State; Oscar lost $180 million in 2015, even though it only had 50,000 members.


  • Oscar paid nearly $1.50 in claims for every $1 it collected in premiums.


  • Obamacare exchanges are not meeting the goals set by the President. In 2013 the Congressional Budget Office predicted 24 million people would participate in the plans. Now the White House hopes to get 10 million to participate.


  • Obamacare premiums are expected to increase by more than 50% in at least three states; Arizona, Oklahoma and Tennessee in 2017.


  • The average price of an Obamacare exchange plan across the country will increase by 19.2%.


  • A federal reimbursement plan for high-risk Obamacare policyholders only offered insurers 12.6¢ on the dollar, because of limits imposed by Congressional Republicans.


  • Insurers filed requests for $2.9 billion in reimbursement for Obamacare losses from the federal government. They only received around $400 million thanks to Congress.


If these numbers are correct the Obamacare exchanges are about to collapse. Such a collapse would be a catastrophe that would millions without health insurance and nothing is being done about it.

Obamacare is a Jobs Program

Another Politico story verifies something that many of us have long suspected, Obamacare was really a jobs creation program. The real goal of the ACA was to increase the number of “middle class jobs” not provide health insurance to the masses.

Disturbingly that portion of the program seems to have worked out with potentially devastating consequences. Medical care is now more expensive than ever before, and America has been saddled with a bloated healthcare system it cannot afford.

Politico writer Don Diamond effectively used these numbers to prove those contentions:

  • More Americans (15.5 million) now work in healthcare than live in Ohio (11.59 million).


  • The number of people working the health insurance industry increased by 9% between 2012 and 2013. That means more bureaucracy, more red tape and less actual care.


  • Most of the new workers are bureaucrats, not healthcare providers. Nine out of 16; or more than half, of the new “health” professionals are administrators not nurses or doctors, venture capitalist Bob Kocher estimated. Kocher was a special assistant to President Obama who helped write the ACA.


  • All that red tape is causing health care spending to skyrocket. US healthcare costs exceeded $3 trillion for the first time in 2014.


  • Healthcare will become America’s largest industry by 2019, employing more people than retail. One reason for this is that retail is becoming efficient while healthcare is getting less efficient. Retailers like Walmart are eliminating layers of administration and paperwork while healthcare is adding it.


  • Around 90% of US business executives said skyrocketing healthcare and insurance costs were holding down their employees’ wages. The same executives said they had less money to invest in company growth because of healthcare costs.


  • Around 30% of US healthcare spending is unnecessary according to some estimates.


The team at Politico is to be congratulated on these excellent stories. They’ve done a great job of exposing the sorry truth about Obamacare. Unfortunately their reporting will be ignored until Obamacare collapses completely.

After reading the Agenda it is easy to see why the idea of single payer health care is becoming so popular. One has to wonder how long it will take for our leaders to pull the plug on the failure that is Obamacare.