Topics: Obamacare

Obamacare’s California test

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Politics,Beltway Confidential,Philip Klein,Obamacare,California,Health Care

If you want to know how the implementation of President Obama’s health care law will go next year, California is a good place to watch. Anticipating problems with the national implementation of the law, some liberals have pre-emptively tried to do pin the blame on recalcitrant Republican governors for putting up roadblocks. But California, in addition to being the nation’s largest state, has been an early adopter, enthusiastically deciding to start setting up exchanges and participate in the Medicaid expansion. So, any problems California runs into will be hard to blame on Republican intransigence.

That’s why it has to be troubling for Obamacare supporters that, as Conn Carroll noted earlier, the nation’s largest health insurer, UnitedHealth, has declined to participate in the state’s subsidized health exchange. Other large national insurers, Aetna and Cigna, also declined. In the absence of large national insurers, the California exchange will be dominated by Kaiser Permanente and Anthem Blue Cross and Blue Shield of California — which already control 87 percent of the state’s insurance market, according to the Los Angeles Times.

As Reuters reported earlier this month, the nation’s large insurers have been reluctant to participate in exchanges in states in which they don’t already offer coverage. The reason this is problematic is that one of the selling points of the exchanges was supposed to be that they would expand choices for beneficiaries, thus promoting competition that would drive down premiums. But without sufficient competition, the cost of insurance will be higher. If that happens, it’s more likely that exchanges will encounter the nightmare scenario that Reason’s Peter Suderman outlined Wednesday, in which young and health individuals stay out of the market, leaving the exchanges dominated by the sickest and most expensive patients, driving up costs further and forcing the government to spend more to cover fewer people than originally anticipated. And for supporters, California hopes to be the best case scenario.

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