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Mark Bertolini, the CEO of health insurer Aetna, laid out just how Obamacare could fall apart during an interview with Bloomberg's David Gura on Tuesday.
Bertolini said that the 25% average increase in premiums for Obamacare exchange plans announced by the Department of Health and Human Services on Monday could be just the beginning of the Affordable Care Act's problems.
Aetna announced in August that it was leaving over 70% of the counties where it offered plans through the Affordable Care Act (ACA) exchanges, citing an older and sicker than expected pool of patients signing up through the exchanges. This pool is then more expensive to cover and led to serious losses for the firm.
Bertolini then laid out how the issues Aetna is facing today could lead to an ever-worsening set of issues that would plague the exchanges. Here's Bertolini's breakdown (emphasis added):
"What happens is, the rates rise and the healthier people pull out because the out of pocket costs aren't worth it. I mean young people can do the math: gas for the car, beer on Friday and Saturday, then health insurance. You know everybody is immortal at that age and so it's very difficult to get people into the exchanges. The higher the prices go — even if they're not out of pocket — it's still too high for people to join. So what happens is the population gets sicker and sicker and sicker and sicker, the rates get higher to try and catch it, it's a fruitless chase, and ultimately you end up with a very bad pool of risk."
Put another way, there are too many sick people on the exchanges, so prices go up to compensate. Healthy people ditch the exchanges because prices are too high. The pool then gets even sicker and prices have to go up yet again, and so on until the system collapses.
Bertolini said that the Obama administration has pushed its abilities to solve these issues to the limit, such as tax discounts for many of those getting their care through the exchanges. Now, it will take Congress to readjust how insurers are compensated for risk in order to make it sustainable.
If those changes were to happen, said Bertolini, there is a chance Aetna could come back to exchanges it left as soon as 2019. In order for that to happen, however, Bertolini said the next president would need to make changes within 90 days of taking office.
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