Aetna Shows Why We Need a Single Payer - by Robert Reich

Found here. My comments in bold.

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This missive boarders on astonishing. Aetna, fully on board with Obamacare, jumps in without a net, fails, and Dr. Reich views it as a success.

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The best argument for a single-payer health plan is the recent decision by giant health insurer Aetna to bail out next year from 11 of the 15 states where it sells Obamacare plans. (When did it become ok o call it "Obamacare?")

Aetna’s decision follows similar moves by UnitedHealth Group, the nation’s largest insurer, and Humana, one of the other giants.

All claim they’re not making enough money (Aetna LOST $400 million in 2 years!)

because too many people with serious health problems are using the Obamacare exchanges, and not enough healthy people are signing up.

The problem isn’t Obamacare per se. (Of course not. How can Obamacare be at fault, the signature achievement of President Obama. We ought to be grateful! No, we have to find some other thing to blame.)

It’s in the structure of private markets for health insurance – which creates powerful incentives to avoid sick people and attract healthy ones. Obamacare is just making the structural problem more obvious. (There are no such incentives. Prospective customers cannot be declined due to pre-existing conditions. This is one of the primary benefits continually cited by leftist supporters. 

In addition, Obamacare is the structure! It creates the environment under which insurers and consumers are REQUIRED to operate. By definition there is no private market structure once the government establishes its own.)

In a nutshell, the more sick people and the fewer healthy people a private for-profit insurer attracts, the less competitive that insurer becomes relative to other insurers that don’t attract as high a percentage of the sick but a higher percentage of the healthy. Eventually, insurers that take in too many sick and too few healthy people are driven out of business. (This in a nutshell is the structure of Obamacare. All insurance companies are required to take sick people. Sick people have high claims. Healthy people do not. There are no other possibilities than for insurance rates to increase, or for insurance companies to lose money.

Allow me to relate a personal experience. I have an acquaintance who blew out his knee. He didn't have insurance. He then signed up for Obamacare and the insurance company paid his claim. 

This creates an incentive for people to not buy coverage. If something goes wrong, they can get coverage after the fact. This is insane.

Consider that insurance rates are determined by insurance company actuaries, who basically crunch numbers all day. They can predict with reasonable certainty the amount of losses in a large number of people. They of course can't predict who will have these claims, but they can predict the total dollar amount of those claims. 

Based on these calculatons, the insurance company knows what to charge their customers. In addition, some customers deviate from the base assumptions because of known risk factors like tobacco use, height/weight ratio, and age. As a result, customers get charged a rate commensurate with their potential for loss. 

These are the factors that must be in place for a risk to be insurable: 

1) Accidental/unexpected. A known or imminent loss is not insurable.

2) Large enough to cause hardship to the insured. The purpose of insurance is to transfer risk.

3) Predictable. The loss arises out of a homogenous group large enough that the insurance company can estimate the total potential for loss.

4) Can be priced affordably in relation to the potential severity of loss. Some losses are so frequent or severe that the insurance premium would be very high. That is why there are exclusions in insurance policies – it is to make premiums affordable.

Based on this, what should an insurance company charge a person with an existing condition? If that person's health bill is, say, $100,000, the premium charged should be about $105,000. Are you following this? A known loss is not an insurable loss, because the cost of the insurance must be equal to the loss plus claim expenses and profit.

We would rightly cry foul if a person crashed his car and then went out to buy insurance afterwards. Same with a person who died and his family then went to buy a life insurance policy. The logic just doesn't add up.

So what is the purpose of covering pre-existing conditions? If not an insurance purpose, what is it? It's a social engineering purpose. It's placing the goals of government upon the private sector and forcing them to act in the interests of government.

So Dr. Reich has already gotten what he is asking for, a health system the fulfills the social engineering goals of government. Single payer does nothing but consolidate the parceled present system into one program. Thus, it is doomed to fail just as Obamacare is failing.)

If insurers had no idea who’d be sick and who’d be healthy when they sign up for insurance (and keep them insured at the same price even after they become sick), this wouldn’t be a problem. But they do know – and they’re developing more and more sophisticated ways of finding out.

It’s not just people with pre-existing conditions who have caused insurers to run for the happy hills of healthy customers. It’s also people with genetic predispositions toward certain illnesses that are expensive to treat, like heart disease and cancer. And people who don’t exercise enough, or have unhealthy habits, or live in unhealthy places.

So health insurers spend lots of time, effort, and money trying to attract people who have high odds of staying healthy (the young and the fit) while doing whatever they can to fend off those who have high odds of getting sick (the older, infirm, and the unfit).

As a result we end up with the most bizarre health-insurance system imaginable: One ever more carefully designed to avoid sick people. (This is insane. It isn't bizarre at all to avoid high risk customers. One could just as easily claim that restaurants are carefully designed to attract hungry people, or people with the money to pay for the meal

If this weren’t enough to convince rational people to do what most other advanced nations have done and create a single-payer system, consider that America’s giant health insurers are now busily consolidating into ever-larger behemoths. UnitedHealth is already humongous. Aetna, meanwhile, is trying to buy Humana.

Insurers say they’re doing this in order to reap economies of scale, but there’s little evidence that large size generates cost savings.

In reality, they’re becoming very big to get more bargaining leverage over everyone they do business with – hospitals, doctors, employers, the government, and consumers. That way they make even bigger profits. (That is, they are engaging in cost savings... which generate profits.)

But these bigger profits come at the expense of hospitals, doctors, employers, the government, and, ultimately, taxpayers and consumers. (The expense is larger and larger because of Obamacare. It seems to be beyond Dr. Reich to connect the previously-admitted fact that insurance companies are losing money because of Obamacare, and must change or get out.)

So the real choice in the future is becoming clear. Obamacare is only smoking it out. (No, it's the primary contributor to the problem.)

 One alternative is a public single-payer system. The other is a hugely-expensive for-profit oligopoly with the market power to charge high prices even to healthy people – and to charge sick people (or those likely to be sick) an arm and a leg. (Only two choices? How about getting government out of the healthcare business so that things can go back to being simple and affordable?

One can hardly blame a non-existent free market for the problem caused by constant government meddling. And the solution certainly isn't more government meddling.)