Where Are the Lower Obamacare Prices that Were Promised?

The state exchanges aren’t experiencing those lower Obamacare prices we were all led to expect. Just the opposite.

Remember when we were told how efficient the health insurance marketplace exchanges would be? Yeah. It’s not working out that way.

Thanks to John R. Graham at the Independent blog for pointing out this Washington Post story: “Almost half of Obamacare exchanges face financial struggles in the future.”

Nearly half of the 17 insurance marketplaces set up by the states and the District under President Obama’s health law are struggling financially, presenting state officials with an unexpected and serious challenge five years after the passage of the landmark Affordable Care Act.

Many of the online exchanges are wrestling with surging costs, especially for balky technology and expensive customer call centers — and tepid enrollment numbers. To ease the fiscal distress, officials are considering raising fees on insurers, sharing costs with other states and pressing state lawmakers for cash infusions. Some are weighing turning over part or all of their troubled marketplaces to the federal exchange, HealthCare.gov, which now works smoothly.

“Cash infusions”? That’s another term for bailouts!

Graham comments,

Well, whether the federal exchange “works smoothly” or not is a discussion for another day, although I would beg to differ with the WaPo. A more appropriate description of healthcare.gov might be that it works illegally, because it pays tax credits to insurers without any legal basis for doing so.

[See also, “The State Obamacare Exchanges: Failing at a Half-Billion Dollars and Climbing.”]

Graham also points out that one of the reasons some of the exchanges are facing surging costs is that they took it upon themselves to use these exchanges as “active purchasers.” That is, they actually negotiated with the insurance companies to try to get better products and service from them. How well did that work? Those exchanges have higher premiums than the exchanges that simply operate as clearinghouses. As Graham wrote in an earlier entry,

The conceit behind the active purchasers was that the exchange could get a better deal for individuals than could individuals themselves. Well, the results for the first year are in: “Active purchaser” exchanges had premiums 13 percent to 20 percent higher than “clearinghouse” exchanges, according to research just published in Health Affairs.

The researchers found this conclusion robust after controlling for population health status, benefit design, and other factors.

This should put paid to the notion that the government has some kind of purchasing power, when acting for individuals, that we do not have on our own. We would never let the government buy our homes or cars for us. Nor should we allow the government to buy our health insurance for us.

If government could get lower prices for consumers, then why not have the government buy all consumer goods for us? Why wouldn’t this work with food or cars?

Envisioning a government that made all purchases for consumer goods before distributing them to citizens seems virtually identical to socialism. So asking why these exchanges did not work is comparable to asking why socialism doesn’t work.

That tells you all you need to know.