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Thursday
Mar202014

Death Spiral Still A Comin'

While some on the left have emphatically claimed there won’t be a death spiral, the ObamaCare exchanges don’t appear to be listening:

Health industry officials say ObamaCare-related premiums will double in some parts of the country, countering claims recently made by the administration.

….insurance officials are quick to emphasize that any spikes would be a consequence of delays and changes in ObamaCare’s rollout. 

They point out that the administration, after a massive public outcry, eased their policies to allow people to keep their old health plans. That kept some healthy people in place, instead of making them jump into the new exchanges.

Federal health officials have also limited the amount of money the government can spend to help insurers cover the cost of new, sick patients. 

Perhaps most important, insurers have been disappointed that young people only make up about one-quarter of the enrollees in plans through the insurance exchanges, according to public figures that were released earlier this year. That ratio might change in the weeks ahead because the administration anticipates many more people in their 20s and 30s will sign up close to the March 31 enrollment deadline. Many insurers, however, don’t share that optimism.

These factors will have the unintended consequence of raising rates, sources said. 

“We’re exasperated,” said the senior insurance official. “All of these major delays on very significant portions of the law are going to change what it’s going to cost.” 

“My gut tells me that, for some people, these increases will be significant,” said Bill Hoagland, a former executive at Cigna and current senior vice president at the Bipartisan Policy Center. 

Hoagland said Sebelius was seeking to “soften up the American public” to the likelihood that premiums will rise, despite promises to the contrary. 

Of course this may prove wrong.  But if insurance industry officials are saying big rate hikes are coming, we might do well to pay heed.

So, if insurance premiums on the exchange are going to skyrocket for 2015, it means:

1. The analysis by the Kaiser Family Foundation (and touted by the left) showing that the number of 18-to-34-year-olds signing up won’t have much impact on premiums is somehow flawed; or

2. The number of 18-to-34-year-olds signing up is even worse than both the official numbers and the number used in the KFF report because that age group makes up a disproportionate amount of the people who have failed to pay premiums; or

3. The problem isn’t so much lack of 18-to-34-year-olds as it is a disproportionate number of people with high medical claims have enrolled in the exchanges, as evidenced by the huge number of enrollees (63%) who have chosen a silver plan; or

4. Some combination of 1, 2 and 3.

For now my money is largely on 3, with perhaps a sprinkling of 2 and 1.  The article notes that after the Administration let people keep their cancelled plans, it “kept some healthy people in place, instead of making them jump into the new exchanges.”  Thus, the problem appears to be not enough healthy people in risk pools rather than not enough young people.

For now it’s still a guessing game.  However, should premiums jump precipitously, we’ll be undoubtedly be able to find out why, because eventually this Administration will release accurate, detailed information on enrollment.  That I am sure of. 

UPDATE:  For more on this, see Avik Roy’s “4 Reasons Why Obamacare Exchange Premiums May ‘Double In Some Parts Of The Country’ In 2015.”  

 

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