(Bloomberg View) — The news that Aetna will stop selling health insurance on the public exchanges in 11 states may not be catastrophic for the Affordable Care Act. The company covers only 8 percent of Obamacare enrollees, after all, and Aetna’s job-based health insurance business was perhaps never well-suited to building low-cost networks for individual customers.
Nevertheless, after earlier defections by UnitedHealth and Humana, Aetna’s move suggests deterioration in the market for health care coverage on state exchanges. The Obama administration may say it is unconcerned, but it should be worried — and should push harder to ensure the exchanges are a good place for insurers to do business.
In explaining its decision to pull back from all but four of the states it had entered, Aetna blamed higher-than-expected medical costs. A month ago, the chief executive also warned that if the company were not allowed to merge with Humana, it might not be financially healthy enough to remain in most of its Obamacare markets. The government has since blocked that merger.
That doesn’t mean it’s impossible for insurers to make money on the exchanges. Others are doing well — including those that also provide low-cost Medicaid managed-care plans and, in many states, nonprofit Blue Cross Blue Shield plans. (So far, Aetna’s decision has left just one county out of 3,140 with no insurer selling on the exchange.)
But the exchanges are not yet the competitive wonderland the law’s drafters promised, in which a multitude of insurers fight to keep prices low and quality high. And until more young and healthy people sign up for exchange coverage — balancing the higher costs of the sick — the risk remains that other insurers will follow Aetna out the door.
To encourage the healthy but uninsured to sign up for coverage, the administration will need to further limit special enrollment periods, preventing people from waiting until they are sick to buy insurance. And it should encourage state regulators to grant insurers rate increases when their costs rise too high.
Congress could do even more to bolster the exchange market — by raising the tax penalty for people with no insurance, or even by automatically enrolling eligible uninsured Americans into exchange plans. Lawmakers could also reinstate and expand the law’s programs for protecting insurers against the risk of unexpected losses.
More extreme measures are always possible: Congress could create a public insurance plan to compete with private options on the exchanges, or allow people in areas with few participating insurers to buy into Medicare.
Such steps may be too much to expect in America’s polarized political climate. But both the administration and Congress should take what measures they can to shore up the state insurance exchanges. The alternative is to allow Obamacare to founder and see millions of Americans lose their insurance coverage, making the health care system more expensive for everyone.
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