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The Obamacare Death Spiral

When New Jersey-based Health Republic Insurance announced recently that it was $46 million in debt and had to shut down, they became the 17th failed ObamaCare co-op since the Affordable Care Act launched three years ago.

These failures — only six of the original 23 co-ops survive — have left hundreds of thousands of people scrambling for coverage.

Meanwhile, insurers claiming big losses are abandoning some state exchanges — including Indiana University Health Plans, whose exit will likely result in 27,000 Indiana residents losing their ObamaCare plans in 2017. Companies still in the federal and state exchanges are raising premiums for next year.

These developments are raise new obstacles for Americans who seek affordable health coverage, and show the much touted overhaul of the country’s health care system is not producing the savings President Obama once promised.

As a candidate in 2008, Obama once said: “If you’ve got health insurance, we’re going to help that employer save $2,500 per family per year... Those savings are going to be passed along to the workers.”

Nationally, though, premium hikes are predicted by analysts to average 8 percent next year. Many insurance companies are looking for much more than that, for the exchange plans and those offered to employers.

Premera in Washington state, for example, has been approved to charge 19 percent more next year. Rates across California will rise an average of 13 percent. Blue Cross and Blue Shield of Texas are asking to raise premiums a jaw-dropping 60 percent.

Long-time critics of ObamaCare say this is coming as no surprise.

“What we’re seeing here is the beginning of a death spiral as far as exchanges are concerned as more companies pull out.”

“That basic promise, that it’s going to make health care more affordable, it’s not making health care more affordable,” said Avik Roy, an author and Republican adviser. “It’s making health care more expensive, especially for the uninsured.”

For insurers, the problem, as always, is a risk pool with too many sick people in it and not enough who are young and healthy. Also, federal backstop programs, intended to help companies that miscalculated how much to charge, have expired. As a result, insurance companies need higher premiums to cover payouts to doctors and hospitals.

The alternative is pulling out of health exchanges altogether, which many companies are choosing to do. In recent months Aetna, United Health Care and several Blue Cross and Blue Shield subsidiaries have announced they will be leaving many of the exchanges by next year.

“That’s going to be the future,” said Roger Stark of the Washington Policy Center in Washington State. “What we’re seeing here is the beginning of a death spiral as far as exchanges are concerned as more companies pull out.”

In Indiana, the company pulling out of the exchange had covered 15 percent of those covered under ObamaCare. Indiana Senator Dan Coats, a Republican, told The Washington Times this is further evidence the health care law is “collapsing before our eyes.”

The Obama administration says its tent-pole legislation can claim plenty of successes. Twenty-million additional people are insured, whether through the exchanges, through expanded Medicaid, or because young adults are able to stay on their parents’ policies. Also, the growth in health care spending nationally has slowed.

As for rising premiums, many Democrats — including Hillary Clinton — are ready to push a government public option that would compete directly with for-profit insurance companies.

“If a public option could bring premiums down, primarily by paying doctors and hospitals less and having lower overhead and no profit, that would lower federal government costs,” said Larry Levitt of the Kaiser Family Foundation.

Donald Trump opposes the public option. He has called for scrapping ObamaCare completely and starting again from square one. Among other things, he favors more competition by allowing people to buy health insurance across state lines.