The wheels are falling off Obamacare in California. UnitedHealth Care, the nation’s largest health insurer, only participated in the state’s exchange, Covered California, for one year before deciding to bail out. Participants are much older and sicker than the Administration or health insurers expected. So, premiums are spiraling up, beyond people’s ability to pay.
Covered California is already responsible for a significant taxpayer-funded cash flow. Currently, only a very small share is borne by the state. That will change if a public option relieves beneficiaries of their sky-high premiums. Last March (after the dust had settled on Obamacare’s third open season), Covered California had just under one million policies in force, covering almost 1.4 million enrollees. Total annual 2016 premiums would amount to $6.8 billion.
However, nine of ten enrollees pay significantly discounted premiums, because the insurers who write the policies receive significant tax credits to induce them to participate. Only $2.4 billion of the estimated total 2016 premium will have been paid by enrollees. Fully $4.4 billion will have been funded by federal taxpayers. So, if the public option eliminates enrollees’ responsibility to pay premium, state taxpayers would be on the hook for $2.4 billion.
But wait, there’s more! The U.S. Department of Health & Human Services estimatesthere are 313,000 Californians who are eligible for subsidized health insurance in Covered California, but chose to buy unsubsidized individual policies outside the exchange. It is not clear why they forgo the subsidies. Perhaps they want access to more doctors and hospitals than are available in Covered California’s infamously narrow networks. If they were freed from the responsibility of paying for any part of their premium in Covered California, surely many would get onboard.
If they are similar to the current enrollees, they would add almost half a billion dollars to the state taxpayers’ tab…
(A version of this Health Alert was published by the Orange County Register.) Dave Jones, California’s Insurance Commissioner, has lifted a page from Hillary