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Obamacare is in better shape than you think

Rick Newman
Senior Columnist

Critics of the Affordable Care Act are still salivating for bad news about the controversial health law—and sometimes getting it.

UnitedHealth (UNH), the nation’s biggest insurer, just announced it will pull out of most Obamacare markets it operates in, because it’s losing money. Investors applauded, sending the company’s shares up on the news. And that comes shortly after the Congressional Budget Office sharply lowered its estimate of the number of Americans likely to be covered under the ACA this year.

Opponents of the ACA warned that more insurers could follow UnitedHealth out the door, possibly imperiling the whole program. “Americans are realizing that government-run health care is leaving them with fewer choices and higher costs,” the conservative nonprofit group Freedom Partners declared. “It’s time to reverse course on this reckless experiment before more people are harmed.”

But the ACA has survived many challenges so far, and it will certainly survive the departure of one carrier. By some measures, in fact, Obamacare is becoming more popular and more efficient, even as Americans everywhere continue to struggle with rising healthcare costs and access to doctors.

Even though it’s the nation’s biggest health insurer, UnitedHealth was a latecomer to the ACA and never committed to many of the markets it served the way other insurers did. The company, for instance, covered fewer than 1,000 patients in Massachusetts, one of the markets it’s leaving. “To get less than 1,000 members in a state like Massachusetts is pretty ridiculous,” says Jeffrey Loo, a healthcare analyst at S&P Capital IQ. “Leaving the ACA will benefit UnitedHealth’s bottom line, but for the ACA it’s relatively immaterial.”

The Kaiser Family Foundation analyzed the impact of UnitedHealth’s departure, and found that there would be less competition in perhaps one-third of the markets covered by an ACA healthcare exchange. That’s bad for consumers, because it’s easier to raise premiums when there are fewer companies offering insurance. But Kaiser also found that UnitedHealth didn’t push down premiums by much when it entered those markets, partly because of the types of policies it chose to offer and also because of fairly low market share. Overall, UnitedHealth covers only about 6% of people who have insurance under the ACA.

It’s also likely other insurers will step into some of the markets UnitedHealth is leaving, especially those that are more heavily populated and therefore more profitable. Cigna (CI) says it plans to expand its ACA offerings. Aetna (AET), Anthem (ANTM), Humana (HUM) and Blue Cross/Blue Shield have no plans to leave. The end result may be fewer carriers and higher premiums in some less populous rural areas, which is often the case in the private market for insurance as well.

Meanwhile, beneath the turbulence, the ACA has been slowly gaining more acceptance. One new study published in Health Affairs found notable changes in the way Americans view the law since it was first passed in 2010. While still unpopular overall, fewer people worry about it disrupting their own healthcare and more feel the law has actually done some good. And the portion of Americans favoring repeal is declining. “The ACA has delivered discernible benefits,” the study concludes, “and some Americans are increasingly recognizing that it is improving access to health insurance and medical care.” Here's a snapshot of the findings:

Source: Health Affairs

Roughly 20 million Americans have gained healthcare coverage through Obamacare – about 13 million through an exchange and the rest through expanded Medicaid coverage. And the portion of Americans lacking insurance has declined by about 9 percentage points under the law.

Problems obviously remain. Insurers say they’ve got too many people signing up for coverage only because they’re sick or they anticipate needing expensive care in the near future; some of those patients then cancel coverage once they’ve received the care they need. Such selective enrollment makes the pool of people covered under the ACA more expensive to cover, one factor UnitedHealth cited in its decision to pull out of the program. The Obama administration may consider rule changes meant to cut down on such churn and force people to enroll for longer periods of time.

High deductibles, co-pays and other out-of-pocket costs also put care out of reach for too many people—including some with insurance. But that’s also true for people with insurance provided by an employer. And the rising cost of prescription drugs is a challenge across the healthcare marketplace. That suggests Obamacare is far from finished, with more reforms needed. But like it or not, it’s here to stay.

Rick Newman’s latest book is Liberty for All: A Manifesto for Reclaiming Financial and Political Freedom. Follow him on Twitter: @rickjnewman.