Obamacare’s State-Based Exchanges Struggle with Surging Costs

Obamacare’s health insurance exchanges are a real problem. States that established exchanges as “active purchasers” of health insurance, instead of just clearinghouses, have higher premiums. So, what is the point of them? Further, the federal government threw billions of dollars at states to set up exchanges, with zero accountability.

Things are not improving. From the Washington Post:

Nearly half of the 17 insurance marketplaces set up by the states and the District under President Obama’s health law are struggling financially, presenting state officials with an unexpected and serious challenge five years after the passage of the landmark Affordable Care Act.

Many of the online exchanges are wrestling with surging costs, especially for balky technology and expensive customer call centers—and tepid enrollment numbers. To ease the fiscal distress, officials are considering raising fees on insurers, sharing costs with other states and pressing state lawmakers for cash infusions. Some are weighing turning over part or all of their troubled marketplaces to the federal exchange, HealthCare.gov, which now works smoothly.

Well, whether the federal exchange “works smoothly” or not is a discussion for another day, although I would beg to differ with the WaPo. A more appropriate description of healthcare.gov might be that it works illegally, because it pays tax credits to insurers without any legal basis for doing so.

That is the question in the Supreme Court case King v. Burwell. If the Supreme Court decides for the plaintiff, healthcare.gov will effectively wind down (because it won’t have any more access to taxpayers’ money). With state-based exchanges failing, the future of Obamacare is in great doubt.

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For the pivotal alternative to Obamacare, please see the Independent Institute’s new book: A Better Choice: Healthcare Solutions for America, by John C. Goodman.