Another Data Point Against Obamacare

“The medical marketplace has really become dominated by the large national carriers…It’s really because it’s not anywhere we feel we can compete effectively.”

Richard Jones, Guardian Life Insurance spokesman

Last week I received a letter from my former healthcare insurer, Guardian Life Insurance, stating that it would be getting out of the medical insurance business.

Apparently, the company made this announcement in mid-February, but is just now starting to notify its customers.

Guardian served about 1,700 companies covering 44,340 employees, which is a fairly small number in the grand scheme of things. That said, if the intention of the Patient Protection and Affordable Care Act was to spur more competition and thereby lower costs, Guardian’s exit could be a sign that the industry is moving in the opposite direction. Less competition usually results in higher long-term costs.

To be fair, it is difficult to determine if Guardian’s exiting the business resulted from Obamacare’s influence on the industry’s market dynamics, or if it was just a natural consequence of free market competition.

The only way to measure Obamacare’s impact in the near-term is if more companies start exiting the industry as Obamacare’s provisions start taking effect.

Only time will tell.

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About Sean Patrick Hazlett

Conservative clean energy crusader, national security hawk, financial analyst, engineer, and former military officer.
This entry was posted in Business, Finance and Economics, Healthcare, Media, Policy, Politics and tagged , , , , , . Bookmark the permalink.

6 Responses to Another Data Point Against Obamacare

  1. Charles McCormack says:

    right. And, since the new law doesn’t really take effect until 2014 it’s a bit early to start blaming it for the end of the world, unless of course you believe Obama is the anti-Christ.

    • Chuck,

      This is clearly a long-term, forward-looking business decision. The company is making a decision on what it thinks the profitability of the healthcare insurance segment will be in the future and has determined it won’t be profitable. It is disingenuous to think that Obamacare had zero to do with the company’s decision.

      Given that Romneycare is Obama’s model, how is healthcare working in MA now that it consumes nearly 30% of your state’s budget?

  2. Scott Erb says:

    Whoever or whatever is blamed, the health care system is a mess. My wife is a CPA working in the financial division of the local hospital. Whether its how the insurance companies operate, government regulations, and the like, things are really screwed up and unsustainable. The OECD average is that countries spend 8.9% of GDP on health care. We have a very high per capita GDP and spend nearly 17% of it on health care. Ultimately I relied on my wife (who thinks very much about the bottom line more than the politics) for my position on the health care reform. She thought it was a flawed reform package but better than doing nothing. I’d welcome Republican ideas to improve the reform, because just trashing it isn’t going to accomplish anything, and the pre-reform status quo was lousy in any event.

  3. I just had a conversation two days ago with someone who sells to health insurance companies. He said that because the insurance companies are “capped” regarding admin fees, they’re doing two things:
    1) Telling (not asking) his company to bear a large part of the administration costs relating to his product and service if they want to continue to sell to the insurance company, and
    2) Telling them to raise their price to them in order to cover their cost.

    As a result, the executive has concluded two things:
    1) They must waste time, energy, and other resources working on a complete shift in their business model.
    2) The insurance companies are becoming nothing more than glorified, overpaid adjudicators.

    I asked him his prognosis, and his was “too early to tell, but it doesn’t look good.” Translation: he really has no clue what the ultimate impact will be. Do people really think this is an environment to hire and raise quality of care?

    It doesn’t matter if ObamaCare starts tomorrow or in 2014, businesses have to anticipate and adapt now in order to stay solvent/competitive because change doesn’t happen overnight. The sentiment alone has an impact on jobs and the industry, and ultimately, quality of care.

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