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Nation’s largest health insurer opts out of California’s Obamacare exchange

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Politics,Beltway Confidential,Conn Carroll,Obamacare,California,Health Care

UnitedHealth, the nation’s largest private insurer, will not participate in California’s Obamacare health exchange, the Los Angeles Times reported Thursday. Health insurance giants Aetna and Cigna will also opt out of Covered California, the state agency charged with implementing Obamacare. All three insurers will still provide health insurance through large employers in the state.

Kaiser Permanente, the largest health insurer in California, will work with Covered California, as will Anthem Blue Cross and Blue Shield of California. Together, these two companies already control 87 percent of the state’s individual health insurance market. That number will only go up as UnitedHealth, Aetna and Cigna drop out of the individual market entirely.

Market consolidation and decreased consumer choice is exactly what some supporters of Obamacare hoped would happen all along. Back in October 2010, Sara Rosenbaum wrote in the New England Journal of Medicine:

The law fundamentally transforms health insurance from a product designed to preserve profitability in the face of rampant adverse selection to a regulated industry whose long-term strength and stability are essential to the public interest and that, in its restructured form, will therefore take on certain characteristics of a public utility.

Unfortunately, public utilities do not have a strong track record of customer service or innovation. The Heritage Foundation’s Robert Moffit writes:

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.

Californians in the individual market are already experiencing the wonders of reduced health care competition. Covered California issued a report earlier this year predicting insurance premiums will rise by as much as 30 percent for individuals who do not qualify for Medicaid or federal subsidies.

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