If you jump in bed with a giant, don’t be surprised when you get crushed when it rolls over. I don’t know if that’s a saying or not, but it accurately describes insurance companies’ situation today.

The insurance industry was on board with Obamacare. The government was going to mandate that everyone buy insurance. “Everyone” included the elusive (to insurance companies) young and healthy people–the “invincibles”–who tended not to buy health insurance. They didn’t buy it, because they knew they were young and healthy and they were taking a calculated risk that they wouldn’t need it, or would need only a cheap, catastrophic care policy. The insurance companies wanted them because the addition of people who don’t utilize their insurance adds money to the risk pool that they can then spend on someone who uses more health care dollars than their insurance premium provides to the company to cover their care. If everyone has to buy insurance, including the young and healthy, it had to appear to insurance companies that they would be able to make more money. Viola’, the decision to get into bed with the giant.

Unfortunately, the giant is rolling over.

First, the “invincibles” are not jumping on board with the plan. The cost of the policies is far greater than the cost of the fines for not purchasing one, so the young and healthy are doing simple math (amazing, given the state of education today) and realizing that they still have the same choice, pay a lot of money for a policy they won’t use, or don’t get insurance (and pay a minor fine that they can actually avoid simply by adjusting their withholding so that the IRS isn’t writing them a check–which it can deduct the fine from–at the end of the year). Additionally, the young and healthy are also the most tech savvy, and have the shortest attention span. A website that doesn’t work is a total turn off to these people. They’re also the most likely people to be aware of whether or not a website is secure and is a safe place to enter information that can be used to steal their identity. So, most of the people signing up for the insurance offered on the exchanges (excluding those going straight to Medicaid, which doesn’t help insurance companies at all) are the older, sicker, and less tech savvy people who will cost the insurance companies more than the cost of their premiums in health care claims. Oops.

Secondly, it turns out that the government, particularly this administration which believes that once passed a law is settled law and can’t be changed or repealed except those parts of it the administration itself decides it can unilaterally change at a whim in a press conference, is rather random in its decision making and doesn’t really have any clue how a business operates, or that there is a cost to paperwork. (Governments actually love paperwork, because it doesn’t cost the government anything–in terms of it actually “losing” money in the private sector sense–and it allows bureaucracy to expand which gives it more power and more happy little public employees who will vote for the party that loves expanded government.) So the insurance companies find themselves unable to plan as the government changes things without warning. One day, the insurance company must cancel plans that don’t meet the mandated coverage standard, but the next day the President announces at a press conference that they should not deny that coverage. The insurance companies, who actually have to go through a lot of work to create insurance plans, are told that what they were just commanded to scrap should now be resurrected even though everything that went into the planning for those plans has been completely changed by what the government told them they had to do prior to that little press conference. 

Insurance companies are planners. That’s damned near ALL they are. Based on actuarial tables and history and projections of costs, they put together plans that, at the end of the day, take care of their customers, cover their costs, and leave some profit. Now they are in bed with an entity that changes things at random, headed by someone who thinks only of politics and not of practical answers. One day, they are putting together plans for companies because there is a mandate that coverage for everyone, including employees of companies that provide insurance, meet a particular standard by a date certain, and the next day that date certain is a year later. Most of the work the insurance companies did to prepare for that have to be scrapped because the situation in a year may be very different than the situation they were planning for. And, given that people don’t seem particularly happy with what’s going on, the companies can have no certainty that things won’t change again between the new date certain and today. How do you plan?

Third, the political nature of government means that scapegoats will be found. With the current administration, those scapegoats will be businesses in the private sector. So, when they are not trying to put the blame on Republicans who had nothing to do with the content of Obamacare, they will turn on the insurance companies. The insurance companies thought they had a partner in the government. It turns out that the insurance companies are going to play the part of whipping boy in an effort by people who play politics with everything to deflect blame for their own incompetence. 

The final thing I’ll mention is a result of that incompetence. The insurance companies, it turns out, are not getting the information they need to enroll people in the plans they’ve selected on the website, and there is no method available for the insurance companies to know how much of the policies they are supposed to provide are being subsidized by the government. They don’t know if their partner, Uncle Sam, is picking up the tab or not. They don’t know how Uncle Sam plans to pay. What do they do with policies that are not subsidized, but the enrollee doesn’t pay (which should nullify the coverage), but the company doesn’t have any clue whether that means that the person didn’t really want to get the coverage, if the person forgot to pay, or if the person thought that 100% of the payment was subsidized. Between getting bad information from the website that they have to try to figure out how to verify and dealing with a system that doesn’t give it information about how much of a premium is going to be paid by the government (the subsidy), insurance companies now have a huge additional and completely unanticipated cost. (The government’s answer, by the way, to the problem with not knowing how much subsidy a particular enrollee is supposed to be getting is to have the insurance company estimate how much the government owes and to square it up later. Seriously. That’s the solution. Three years in the making. Brilliant.)

The insurance companies got into bed with the giant state, and they are getting crushed as the giant rolls over. Some would say they deserve it. The problem is that their being crushed is a big problem for the rest of us who are now dependent on the insurance industry to pay for our health care.