OPINION

Editorial: Government should not rely on private insurers

The Register's Editorial

Aetna announced last week that it was reducing participation in health insurance exchanges created by the Affordable Care Act. It will sell plans in only four states next year, including Iowa, down from 15 this year. This follows similar market exits from UnitedHealth Group and Humana.

This is yet another reminder of why government should not rely on private companies to deliver health insurance to Americans. History has repeatedly shown this is a costly, dangerous and unsustainable idea. Yet politicians refuse to listen to history.

When Medicare was created in 1965, the goal was to insure seniors through a program administered by the government. In traditional Medicare, Uncle Sam directly pays providers for health services. The program is reliable, predictable and has low administrative costs. But politicians saw an opportunity to funnel public money to for-profit insurers to take over the job of administering benefits.

In the 1990s, private “Medicare+Choice” plans saved taxpayers no money while insurers demanded more and more money from the government. The companies failed to turn a healthy profit and disappeared. Fortunately, seniors could return to traditional, government-run Medicare.

Instead of learning from that experience, Congress embraced private insurers again in 2003. Medicare Advantage plans resulted in taxpayers paying 14 percent more per senior than the cost of care in traditional Medicare. Yet these plans are popular with seniors, who pay lower monthly premiums — and vote. Earlier this year, the GAO reported the feds improperly paid Medicare Advantage companies $14.1 billion in 2013. That’s billion with a "b."

Lucky private insurers. Unlucky taxpayers. Reckless politicians.

Then there are governors, including Terry Branstad, who insist on handing over Medicaid administration to for-profit companies. Let’s take a look at how this has worked in Florida, where former Gov. Jeb Bush pushed the idea, arguing the cost of Medicaid operated by the state was “unsustainable."

Privatization was rolled out statewide in 2014. Almost immediately, insurers complained they were losing money. They asked the state for a $400 million raise and a 12 percent increase in rates. This, of course, jeopardized any savings taxpayers may have realized. Two months ago Florida received a surprise Medicaid bill: It owed $433 million in unpaid reimbursements to insurers.

Then there is the Affordable Care Act.

One of the law’s fundamental flaws is its reliance on private insurers to provide coverage to millions of Americans through exchanges. With no “public option” safety net to offer government coverage if companies jump ship, the insurers have incredible political and financial power. They can, in fact, try to hold the government hostage. Pay higher reimbursements, don't dispute our business decisions, do what we say or we are dropping out of exchanges.

Enter Aetna.

In a July 5 letter, Chief Executive Mark Bertolini informed the Justice Department that if it sued to block Aetna’s dealt to acquire Humana Inc., the insurer would reduce its presence in exchanges. The Obama administration says such a merger would increase consumer costs.

“If the deal were challenged and/or blocked we would need to take immediate actions to mitigate public exchange and ACA small group losses,” he wrote.

Is that a warning? A threat? And how is the Obama administration supposed to respond?

The Justice Department sued to block the merger. Then Aetna announced it was scaling back its offerings in exchanges.

Americans’ access to health insurance should not depend on the profit margins, business dealings, or mergers of for-profit companies. Not in Medicare. Not in Medicaid. And not in exchanges created by health reform law. Instead of funneling tax dollars to private companies, government is better equipped to administer insurance. It is not beholden to stockholders. It does not seek to turn a profit. And it will not abandon the responsibility of providing health coverage to Americans.