The one aspect of Obamacare that I thought wasn’t terrible was the idea of exchanges: marketplaces that would make it easy to comparison-shop for health care plans. I was wrong:
Covered California, the state agency implementing the federal Affordable Care Act, is announcing the winning bidders and proposed rates Thursday for its insurance exchange, where as many as 5 million residents are expected to shop for coverage next year.
Winning bidders? WTF?!
It turns out, Obamacare exchanges aren’t marketplaces at all! In a marketplace, anyone could offer their product. Here, health insurers bid to get their plans on the exchange. You aren’t allowed to offer less coverage than the standard plan, and if you offer more, you lose to lower bidders. Thus, every plan on the exchange is essentially the same, at essentially the same price.
Consequently, three big insurers that used to have a small portion of the individual market are pulling out entirely:
UnitedHealth, the nation’s largest private insurer, Aetna Inc. and Cigna Corp. are sitting out the first year of Covered California, the state’s insurance exchange and a key testing ground nationally for a massive coverage expansion under the federal healthcare law. . . Together, in 2011, those three big insurers had 7% of California’s individual health insurance market, according to Citigroup research.
Thus, the exchanges are reducing the array of choices available to individual shoppers, the opposite of what Democrats told us, but exactly what one would have expected had one known how this disaster actually works.
Nevertheless, California officials are putting brave face on the mess:
Peter Lee, executive director of Covered California, declined to comment on specific companies ahead of Thursday’s announcement. But he rejected any criticism that diminished competition could lead to higher premiums and fewer choices.
“There will be plenty of price competition for California consumers,” Lee said in an interview Wednesday. “They will be benefiting from robust competition.”
Fools. They never, ever learn.