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Tags: Top News

California Just Gave Us a Glimpse of How Obamacare Will Fail

By , Money Morning • May 23, 2013

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Turns out no one knows how Obamacare will work - not even the big-name insurers.

And now, we're starting to see the effects of uncertainty.

Today (Thursday), the Los Angeles Times reported that United Health, Aetna, and Cigna have opted out of the California insurance exchange.

UnitedHealth has adopted a wait-and-see policy: "We are simply taking the time to carefully evaluate and better understand how the exchanges will work to ensure we are best prepared to participate meaningfully in their development," explains a spokesman to the LA Times.

Cigna resolved to participate in exchanges in only half of the 10 states where it sells individual health policies, and California didn't make the cut.

Aetna referred LA Times' questions to Covered California, the state agency in charge of implementing Obamacare.

That means millions of Californians who will have to choose health insurance from exchanges or face a penalty will not be able to pick plans from those three big insurers - signaling limited options ahead thanks to Obamacare.

UnitedHealth, Aetna, and Cigna's response to the California exchange is just the beginning.

These three companies are but the first dominoes to fall to Obamacare's less-than-clear implementation.

Obamacare Facts: More Scary Signs of What's Ahead

Common sense business practice dictates that insurers will participate in those exchanges which guarantee them the highest certainty of success - namely, the states where they can profit the most, while making as few changes to their existing products as possible.

Otherwise, you can bet that insurers will sit tight and see how participating insurers fare before they risk their own necks by jumping into an uncertain environment. This results in a lack of competition among insurance companies in individual states.

The billion dollar question is, how will this lack of competition affect 'We the People'?

History dictates that lack of competition stifles innovation and customer service, while driving up prices. It's precisely why we have antitrust law in this country, which thrives on free market principles and ideals.

The Examiner compares our new government-regulated health care system with public utilities, citing The Heritage Foundation's Robert Moffit:

"The characteristics of public utility economics are markets dominated by a few large firms, with low rates of return and captive customers, in which the firms' pricing power is constrained by government regulation, but government's exercise of regulatory power is constrained by the need to keep the remaining firms profitable to avoid the widespread social and economic dislocation that would occur should they be driven out of existence. In essence, this is a prescription for achieving market equilibrium through an economic "mutually assured destruction" stand off - with little or no remaining consumer choice or product innovation."

Our proud American reputation for being top-notch health science innovators is going the way of the handsome jock from high school - gain about 50 pounds, lie on the couch all day and reminisce about the past.

Now, let me paint an even uglier picture...

A study, commissioned by California, came out in March reporting that Obamacare will drive up individual insurance premiums in the state.

Wealthier people could see premiums increase by an average of 30%. Lower income people will be able to offset most of the increase via subsidies. That means the middle class will fall somewhere in between.

Well, so much for lower premiums.

Heck, so much with Obamacare!

For more on Obamacare, check out 15 Obamacare Facts the President Doesn't Want You to Know

Related Articles:

  • Money Morning:
    Why Workers Are Getting Squeezed by Obamacare
  • Los Angeles Times:
    UnitedHealth, Aetna and Cigna opt out of California insurance exchange
  • The Examiner:
    Nation's largest health insurer ops out of California's Obamacare exchange
  • The Heritage Foundation:
    Health Care Consolidation and Competition after PPACA
  • The New York Times:
    Health Care Law Will Raise Some Premiums, Study Says
  • Milliman Client Report:
    Factors Affecting Individual Premium Rates in 2014 for California

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Jerry Hackett
Jerry Hackett
10 years ago

Why all the fear-mongering over the Affordable Care Act(aka Obama Care)?
For most Americans (those with health insurance they want to keep) there will be NO change. In fact, the only likely change will be LESS upward pressure on health care premiums, because there will be fewer people without health insurance. Those without health insurance tend to use the ER as their PCP, and as those ER bills are usually left unpaid, bills for those WITH insurance are multiplied by factors ranging from .5 – 2 or even 3, to cover the unpaid bills. More recent news from CA is that premiums in the exchange are unexpectedly LOW, around $400/month with NO exclusions for pre-existing conditions. Obama Care IS the free-market approach to the problem of too many people without health insurance. This will bring 20 – 30,000,000 new customers to the health insurance market. Many insurers went to the market place to bid for these customers. I would fully expect some or all of the big insurers that opted out of the CA exchange to be reconsidering their decision.

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jeremy rnr
jeremy rnr
10 years ago
Reply to  Jerry Hackett

More government is not the solution. Does anyone remember the savings and loan scandal or the housing market collapse(which was caused by the government through fannie mae and freddie mac backing any and every loan).

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jeremy rnr
jeremy rnr
10 years ago

Another government "solution" to a government created problem. Why were hospitals set up to run like monopolies??? To set up for obamacare of course. You can't take over something that is running well so you regulate a medical system that stifles competition, hides prices and overburdens both the medical system and patients through law. When prices skyrocket swoop in twenty or forty years in the future as the "savior" of all things important. This is how he modern progressive democrat party works, power to the government not the people.

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jeremy rnr
jeremy rnr
10 years ago

Then there is the IRS being used to attack groups that use the words "constitution and bill if rights education, promoting less government, and of course tea party(which is based on the principles that founded thus country).

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