Why private health insurers are losing money on the Affordable Care Act

Friday, Oct 14, 2016
by B. Rose Kelly

The choice of young people to forgo health insurance combined with the high cost of providing care for the sickest Americans are together generating big losses for insurers participating in the Affordable Care Act’s state insurance marketplaces.

Aetna, one of the nation’s largest health insurance companies, announced in August that it would no longer participate in exchanges, citing a $200 million loss. Now, Aetna’s premiums are expected to go up by 25 percent in 2017, so the company can attempt to make up for the loss. Other insurers are also withdrawing from the marketplaces and raising rates, some up to 20 percent.

It turns out that some private health insurers, like Aetna, underpriced their policies on the ACA exchanges, according to a policy paper in the Journal of the American Medical Association (JAMA) by Uwe Reinhardt, the James Madison Professor of Political Economy and professor of economics and public affairs at Princeton’s Woodrow Wilson School of Public and International Affairs.

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