Why the healthcare exchanges failed

Rich Lowry:

For years, ObamaCare supporters have been telling critics of the law to shut up and fall in line. Now, they are urging them to come to its rescue.

A key part of President Obama’s domestic legacy is sputtering so badly that even the law’s boosters are admitting that the federal government needs to do more to prop it up.

The ObamaCare exchanges were supposed to enhance choice and hold down costs — and are doing neither. Abandoned by more and more insurers, the exchanges — once billed as robust “marketplaces” — are becoming pitiful shadows of themselves.

In most or all of the following states — Alaska, Alabama, Arizona, Florida, Missouri, Oklahoma, North Carolina and Tennessee — probably only one insurer will offer insurance through the exchanges next year, reports The Wall Street Journal. One large county in Arizona may have no exchange insurer at all. An analysis by the Kaiser Family Foundation finds that 31 percent of US counties will have one insurer and another 31 percent will have just two.

It isn’t Republicans hobbling the law. It isn’t the greedy insurance companies, who were overly optimistic about the exchanges at the outset and are now paying the price. It is fundamental economic forces that the law’s architects blithely ignored. But economic incentives will not be mocked.
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I suppose the Democrats idea for the exchanges is that the insurance companies would compete on price.  But to compete on price the companies needed to have more of control of what services could be offered.

What made the scheme fail is that the Democrats insisted on coverage that could not be sustained by the price controls they had on the product.  There was also the miscalculation on how many healthy people would sign up for the insurance.

Thus the current death spiral caused by having too many sick people in the plans and not enough money coming in to cover the cost of their illnesses.