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June 13. 2013 10:19PM

Sally C. Pipes: Obamacare's exchanges are on a collision course with reality

Obamacare’s health insurance exchanges are supposed to enroll millions of Americans in just a few months. That may come as a surprise to them, according to a new poll.

More than three-quarters of Americans know “little” or “nothing” about the state-based exchanges, according to the Kaiser Family Foundation.

They won’t like what’s in store. With insurers increasingly unwilling to participate, premiums set to skyrocket, and consumer confusion running rampant, Obamacare’s exchanges are primed for failure.

Scheduled to open for enrollment in October offering coverage that takes effect in January, Obamacare’s exchanges were supposed to be technocratic masterworks. They’d bring together insurers in one, simple, online marketplace. Consumers and small businesses could choose from among several health plan options. “Managed” competition among participating insurers would help keep costs low for shoppers — and hold down public spending on subsidies for purchasing coverage.

Of course, things haven’t gone as planned.

Take enrollment. The Department of Health and Human Services’s first effort at an application clocked in at 21 pages for a family of three. After a public outcry, the Department spent stacks of taxpayer dollars on high-priced consultants to teach them how to make the form simpler. In late April, they proudly presented a redo that was only three pages.

Smart government at work, right? Not really. The new sample form is for childless or single adults. The “revamped” version for a family with a couple of children can still add up to 20 pages.

It’s precisely this kind of complexity that’s going to scare consumers away from the exchanges. And consumers aren’t the only ones fleeing. Insurers are increasingly opting out of the exchanges — uncertain about the regulations they’ll face or whether there will actually be any customers for them to sell to.

The largest insurer in the country, UnitedHealthcare, has said it could end up in as few as 10 exchanges. The number-two, Aetna, recently announced that it had applied to sell policies in 14 states. Humana plans to do the same. And Cigna will participate in only a “limited” number of state markets.

Employees of small businesses participating in the federally run exchanges will have just one choice through at least 2015 — not several options, as the Obama administration originally promised.

With fewer plans on offer, the exchanges are going to be significantly less competitive than planned. That means higher prices for enrollees.

Indeed, the average monthly premium for plans sold in Vermont is expected to be as high as $600. And in Maryland, prices for small-group plans will jump 15 to 28 percent next year, according to an Aetna spokesman.

Making matters worse, as part of a misguided campaign to ensure that all plans conform to their particular conception of “fair,” federal policymakers have created a long list of coverage requirements — including everything from mental-health and drug-abuse treatments to vision care. Whether patients actually want such coverage — or would be willing to pay less for policies without such benefits — does not matter.

According to the Council on Affordable Health Insurance, such benefit mandates can drive up an insurance policy’s cost by up to 50 percent.

The exchanges have gotten off to such a bumpy start that even Obamacare’s most vehement supporters are hedging their bets. Henry Chao, who’s officially in charge of the exchanges’ technology apparatus, recently told Congressional Quarterly that he’s “pretty nervous.”

Secretary of Health and Human Services Kathleen Sebelius is trying to calm those nerves by spending yet more money to promote the exchanges. Congress has proved less than willing to give her the cash she wants. So she’s turned to health care companies, asking for large donations to support an “awareness campaign.”

Sebelius has claimed that she’s simply helping a nonprofit — one that just so happens to be staffed by alums of the Obama administration — raise money to expand access to insurance. Firms regulated by Sebelius’s agency may see her “requests” more appropriately as shakedowns.

Obamacare’s exchanges are on track to be costly, unpopular messes. In just a few short months, millions of Americans will find out as much firsthand.

Sally C. Pipes is president, CEO, and Taube Fellow in Health Care Studies at the Pacific Research Institute. Her next book, “The Cure for Obamacare” (Encounter), will be released this summer.


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