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发帖数: 29846 | 1 Obamacare Heading For Death Spiral: Premiums Rising Rapidly, Young & Healthy
Bailing Out
by The Washington Times • March 30, 2015
By Sean Parnell at The Washington Times
The Supreme Court decision in King v. Burwell, the case challenging the
Obama administration’s decision to award tax credits for health insurance
sold through federally established exchanges, could turn on the question of
whether a ruling that ends the tax credits on federal exchanges might cause
something known as a “death spiral” in health insurance markets.
The good news is the answer is probably no, but the bad news is that’s only
because the death spiral has probably already started.
A death spiral generally occurs when insurers are forced to raise premiums
sharply to pay promised benefits. Higher premiums cause many of the
healthiest policyholders, who already pay far more in premiums than they
receive in benefits, to drop coverage.
When healthy policyholders drop coverage, it leaves the insurer with little
choice but to raise premiums again because they now have a risk pool that is
less healthy than before. But another premium increase means many of the
healthy people who remained now drop their policies, too, and this continues
until the only people willing to pay the now-very-high premiums are those
with serious medical conditions.
The death spiral isn’t just a theory. Eight states learned this the hard
way in the 1990s when they enacted two policies known as “community rating
” and “guaranteed issue,” requiring health insurers to sell coverage to
anyone who wanted it at the same price.
This quickly set off a death spiral because people knew they could wait
until they were sick or injured to buy insurance, and premiums rose sky-high
as healthy people exited the individual insurance market while the sick
remained.
New Jersey enacted both community rating and guaranteed issue in 1992. By
2003, the lowest monthly premium for a family policy in the state was $3,810
and nearly 40 percent of the people in the individual market had dropped
their coverage.
Obamacare includes both community rating and guaranteed issue. The hope of
the politicians who passed Obamacare was the individual mandate would keep
the relatively healthy from dropping insurance coverage, thereby avoiding a
death spiral.
During oral arguments in King, Justices Anthony Kennedy and Ruth Bader
Ginsburg expressed concerns that not allowing subsidies in the 37 states
using the federally established exchange would set off a death spiral in
those states. Their fear was that while subsidies would no longer be
available, and there would effectively be no individual mandate, community
rating and guaranteed issue would remain.
Many commentators saw Justice Kennedy’s comments as a signal he isn’t
willing to stop subsidies on federal exchanges, either because of the
serious consequences of doing so or because surely Congress could not have
intended to put states in the position of choosing between creating an
Obamacare exchange or seeing health insurance markets destroyed.
What Justice Kennedy and many others may not understand, however, is the
death spiral is probably already underway in all 50 states, regardless of
how the Supreme Court rules in this case.
According to the Manhattan Institute, premiums climbed by 41 percent on
average from 2013 to 2014, and premiums are likely to rise sharply again
after two insurance company bailout programs included in Obamacare expire in
2017.
The other sign health insurance markets are in the early stages of a death
spiral is the age mix of those buying policies through Obamacare. Originally
it was estimated that around 40 percent of enrollees had to be in the
relatively healthy 18 to 34-year-old age segment, so their premiums could be
used to pay for the health expenses of older, less-healthy enrollees. So
far it appears only some 28 percent of enrollees are in that coveted age
group, which also comprises around half of the uninsured.
All of this means insurers are getting a risk pool that is less healthy than
expected, and more premium hikes are around the corner. While subsidies
hide some from the full impact, others in the middle class will not be
shielded.
It will undoubtedly take a few years to know for sure, but for anybody
concerned about setting off a death spiral or thinking Congress surely didn
’t intend to do so, don’t worry. It looks like it’s already here, whether
Congress intended it or not. |
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