Current Events Health Insurance Health Reform

The End of the Obamacare Exchanges

Princeton economist Uwe Reinhardt things so.  In an interview with Vox he states:

The natural business model of a private commercial insurer is to price on health status and have the flexibility to raise prices year after year. What we’ve tried to do, instead, is do community rating [where insurers can’t price on how sick or healthy an enrollee is] and couple it with a mandate.

When you do this as the Swiss or Germans do, you brutally enforce the mandate. You make young people sign up and pay. But we are too chicken to do that, so we allow people to stay out by doing two things: We give them a mandate penalty that is lower than the premium. And we tell them, If you’re really sick, we’ll take care of you anyhow. [A federal law called EMTALA requires hospitals to treat all patients with life-threatening conditions regardless of their ability to pay.]…

Liberals think this will settle itself. Eventually, though, we all know about the death spiral that actuaries worry about, and I think what you’re seeing now is a mild version of that. These things accelerate, as premiums keep rising.

With insurers such as Aetna announcing that they will drop 80% of their Obamacare policies, these concerns are more than hypothetical.

1 Comment

  1. Obamacare never intended to create a comprehensive, rational response to universal access and the “healthcare crisis”. Simply put, it was an all-inclusive program intended to appease the patient and all healthcare stakeholders (i.e. insurers, hospitals, doctors, etc), and sprinkled with a few well-intended nuggets, such as guaranteed issue and improved healthcare access. Now the hard work begins: healthcare reform in favor of the people first, regardless of the stakeholders’ (and lobbyists) and their non-negotiable positions.

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