Regarding ObamaCare’s first adverse-selection death spiral, Julie Rovner posts this over at Shots, the NPR health blog:
The advocacy group Health Care for America Now was the first to bring the action to widespread attention. “Even for the insurance industry this behavior is surprisingly brazen,” HCAN Executive Director Ethan Rome wrote in a blog entry for the Huffington Post. “They don’t like the rules, so they’re going to take their ball and go home.”
But the insurance industry trade group America’s Health Insurance Plans rejected HCAN’s contention that the companies’ refusal to sell to all comers is somehow a violation of a promise made earlier this year by AHIP CEO Karen Ignagni that insurance companies would comply with regulations regarding children and pre-existing conditions.
In an interview, AHIP spokesman Robert Zirkelbach said Ignagni was responding only to promises that children wouldn’t be excluded from their parents’ plans and that if the kids are covered, the policies would include treatment of their pre-existing condition.
What emerged in the regulations, however, Zirkelbach said, was, in effect, a requirement that insurance companies accept children even if they are already sick. That, he said, would be tantamount to exactly what companies want to avoid with the adult population — letting people wait until they are sick to sign up for insurance. Which is exactly why the insurance industry is so insistent on a coverage mandate: It needs premiums of healthy people to help cover the costs of those who are not.
In effect, ObamaCare supporters said to the public, “Give the government more power over insurance companies and the government will make health insurance more accessible and secure.” These few paragraphs capture how that strategy has turned into a cat-and-mouse game with insurers, and is turning ObamaCare’s most attractive selling point — guaranteed coverage for kids with pre-existing conditions — into an empty promise.
In stark contrast stands the individual insurance market. Yes, insurers there generally (but not always) charge premiums that correspond to risk, and sometimes turn people down — but that market has also been remarkably innovative when it comes to protecting sick people from higher premiums. RAND Health economist Susan Marquis and her colleagues write, “a large number of people with health problems do obtain coverage” in the individual market: “Our analysis confirms earlier studies’ findings that there is considerable risk pooling in the individual market and that high risks are not charged premiums that fully reflect their higher risk.” Even as Congress debated ObamaCare, UnitedHealthcare introduced an innovative new product that protects people with employer-sponsored coverage from facing sky-high premiums when they leave their company plan. Economist John Cochrane predicts that further innovations can make health insurance more secure and improve the quality of medical care.
Which process seems more likely to improve quality and reduce costs? The political process, where politicians and regulators try to force insurance companies to act against their financial self-interest? Or the market process, where self-interest forces insurers to find innovative ways to give consumers more of what they want?
