Bigger subsidies would help get Obamacare over bumps

More than two and a half years have gone by since the Affordable Care Act, a.k.a. Obamacare, went fully into effect. Most of the news about health reform since then has been good, defying the dire predictions of right-wing doomsayers. But this past week brought some genuine bad news: The giant insurer Aetna announced it would be pulling out of many of the “exchanges,” the special insurance markets the law established.

This doesn’t mean the reform is about to collapse. But some real problems are cropping up. They’re problems that would be relatively easy to fix in a normal political system, one in which parties can compromise to make government work. But they won’t get resolved if we elect a clueless president (although he’d turn to terrific people, the best people, for advice, believe me. Not.). And they’ll be difficult to resolve even with a knowledgeable, competent president if she faces scorched-earth opposition from a hostile Congress.

The story so far: Since Obamacare took full effect in January 2014, two things have happened. First, the percentage of Americans who are uninsured has dropped sharply. Second, the growth of health costs has slowed sharply, so that the law is costing both consumers and taxpayers less than expected.

Meanwhile, the bad things that were supposed to happen didn’t. Health reform didn’t cause the budget deficit to soar; it didn’t kill private-sector jobs, which have actually grown more rapidly since Obamacare went into effect than at any time since the 1990s. Evidence also is growing that the law has meant a significant improvement in both health and financial security for millions of Americans. So what’s the problem? Well, Obamacare is a system that relies on private insurance companies to provide much of its expanded coverage. And many of these private insurers are now finding themselves losing money, because previously uninsured Americans who are signing up turn out to have been sicker and more in need of costly care than we realized.

Some insurers are responding by hiking premiums, which were initially set well below what the law’s framers expected. And some insurers are simply pulling out of the system.

In Aetna’s case there’s reason to believe that there was also another factor: vindictiveness on the part of the insurer after antitrust authorities turned down a proposed merger.

So how bad is the problem? Much of the new system is doing pretty well — not just the Medicaid expansion, but also private insurer-based exchanges in big states that are trying to make the law work, California in particular. The bad news mainly hits states that have small populations and/or have governments hostile to reform, where the exit of insurers may leave markets without adequate competition.

But it would be quite easy to fix the system. It seems clear that subsidies for purchasing insurance, and in some cases for insurers themselves, should be somewhat bigger — an affordable proposition given that the program so far has come in under budget, and easily justified now that we know just how badly many of our fellow citizens needed coverage. There should also be a reinforced effort to ensure that healthy Americans buy insurance, as the law requires. Such measures would go a long way toward getting things back on track.