Political uncertainty might not be the only threat for the Affordable Care Act’s future as the health insurance exchanges, created to help millions to find coverage, are leading insurers to money-losing ventures.
The largest insurer group in the U.S, UnitedHealth Group (NYSE: UNH), could lose as much as $475 million on its exchange business this year and may not participate at all in 2017, as reported by M Live.
Aetna (NYSE: AET) has even criticized the existing policy and questioned the viability of the exchanges while dozens of nonprofit insurance cooperatives created by the law have already closed living up to 750,000 people on the look for new coverage plans.
Insurer defections would lead to fewer coverage choices on the exchanges and could eventually mean the end of the viability of the law, assuming that the next elected president would like to keep it.
The biggest problem with exchanges is the lack of balance on the healthy and the sick. The insurance business needs to have healthy consumers who pay their membership so the company can afford to pay the medical bill for their not so healthy ones.
The fact is that with the ACA, patients can access coverage with previous medical conditions, which is a good thing for them, but opens up the opportunity for people to wait to get sick to look for coverage. Sick patients have increased while the healthy ones have stated the same.
Another problem with the law is that even though it provides an annual enrollment window for several week so people can enroll or change coverage, the law also admits the enrollment outside that period if their insurance needs changes like a new address, a spouse or a child to add, among other exemptions.
Those exchanges do not require any paperwork like birth certificates or marriage licenses to prove the legitimacy of the change. Insurers have said that this situation leaves them vulnerable.
A case that has been an example of such vulnerability is when the Montana Health Co-op had a severely ill costumer in a hospital sign up for its coverage in October and then drop a $250,000 bill from the company. Further investigation led to finding that the reason for the special enrollment was that the patient changed ZIP codes.
The federal government, which runs exchanges in most states, has recently announced that it will start seeking proof that customers actually qualify for special enrollment periods in the next few months.
The effectiveness will depend now in how aggressively the government enforces it, said Goldman Sachs insurance industry analyst Matthew Borsch in a research note.