The Unstable Economics in Obama’s Health Law – WSJ

Barack Obama’s signature health-care law is struggling for one overriding reason: Selling mispriced insurance is a precarious business model.

Aetna Inc. dealt the Affordable Care Act a severe setback by announcing Monday it would drastically reduce its participation in its insurance exchanges. Its reason: The company was attracting much sicker patients than expected. Indeed, all five of the largest national insurers say they are losing money on their ACA policies and three, including Aetna, are pulling back from the exchanges as a result.

The problem isn’t technical or temporary; it’s intrinsic to how the law was written. By incentivizing insurers to misprice risk, the law has created an unstable dynamic. Total enrollment this year will be barely half the 22 million the Congressional Budget Office projected just three years ago. Premiums, meanwhile, are set to skyrocket, which will further hamper enrollment. It isn’t clear how this can be fixed.

Source: The Unstable Economics in Obama’s Health Law – WSJ

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