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Policy: Entitlements

Growing worries about Obamacare forcing insurers out of state markets

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Philip Klein,Columnists,Obamacare,President,Health Care,Federal Budget,Entitlement Reform,Entitlements

"My guiding principle is, and always has been, that consumers do better when there is choice and competition," President Obama declared in a September 2009 speech to a joint session of Congress aimed at selling his vision for health care. "That's how the market works."

Obama continued, "Unfortunately, in 34 states, 75 percent of the insurance market is controlled by five or fewer companies ...And without competition, the price of insurance goes up and quality goes down."

One of the chief ways that Obama's health care law aims to expand insurance coverage is by setting up government-run exchanges in all 50 states, plus the District of Columbia.

In February 2010, a month before passage of the law, Obama explained at a bipartisan health care summit at the Blair House, "What we've said is that if you join one of these exchanges, you will have choice and you will have competition. You will have a menu of private insurance options that you'll be able to purchase."

Increasing the number of insurance options for individuals was one of the key ways in which Obama claimed the law would be able to drive down insurance costs. But with less than 70 days before the exchanges are set to open, large insurers are pulling out of states as a result of the health care law, resulting in less choice for consumers, not more.

Among the chief promises of Obama's health care law was that it would make insurance more affordable. It is, after all, is the Patient Protection and Affordable Care Act.

In California, Anthem Blue Cross, Kaiser Permanente and Blue Shield accounted for 87 percent of the insurance market in 2011, according to the Los Angeles Times, which cited Citigroup data. Instead of encouraging other players to challenge this dominance, two other insurers which controlled seven percent of the market - Aetna and UnitedHealth - have said they were pulling out of California. Together, their decisions leave nearly 60,000 Californians in the lurch.

The state's insurance commissioner, Dave Jones, raised concerns about this development. "United Healthcare's decision to exit the California individual health insurance market is bad news for consumers," he said in a statement released earlier this month.

"While both United Healthcare and Aetna have a very small share of California's individual health insurance market, their departure means less choice, less competition, and more market consolidation by the remaining big three health insurers - Anthem Blue Cross, Blue Shield of California, and Kaiser - which means an increased likelihood of even higher prices from those health insurers downstream."

On July 19, Anthem Blue Cross, California's largest insurer of small businesses, pulled out of the Obamacare small business exchange. The defections of insurers aren't limited to California.

The St. Louis Post-Dispatch reported that United, the country's largest insurer, also declined to participate in Missouri and Illinois exchanges. The newspaper also noted that Cigna would only participate in the exchanges in five of the 10 states where it currently offers individual coverage.

Earlier this month, Ohio-based Medical Mutual said it would no longer offer individual insurance coverage in South Carolina, where it is currently the state's second-largest insurer.

"It takes a great deal of resources and effort to comply with (health care) reform," a company spokesman told the Post and Courier newspaper in Charleston.

A spokeswoman for Blue Cross Blue Shield of South Carolina told the newspaper that "most consumers will see an increase in their health insurance premium, particularly the young and the healthy."

Among the chief promises of Obama's health care law was that it would make insurance more affordable. It is, after all, is the Patient Protection and Affordable Care Act.

But the reluctance of insurers to participate in the law's exchanges are yet another obstacle to this goal.

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Philip Klein

Commentary Editor
The Washington Examiner