Monday, February 20, 2017

A Brutal Week for Obamacare: Enrollment Shrinking; Costs Soaring - Death Spiral

An excellent paragraph from Megan McArdle explaining the phenomenon of death spiral.  The end is near:
Why not just raise the premiums? Because a pool comprising too many sick people can’t be stabilized at any price. Once you start jacking up the premiums to pay for all the pricey health care your members are using, you start losing your remaining healthy customers, and the premiums have to be jacked up still further. The result -- the dread “death spiral” that Bertolini [Aetna's CEO] was talking about -- will ultimately end up with premiums that no one is willing to pay, or can afford to. What Humana is saying (and Bertolini made similar remarks) is that they’ve got a pool that they simply don’t think can be sold into profitably, because the problem isn’t that they mispriced the premiums. The problem is that too few healthy people are buying insurance. And now that exchange enrollment has begun to shrink, it’s obvious that problem isn’t going to get better. It’s likely it’s going to get worse. Bertolini predicts that more insurers are going to pull out for 2018, leaving many areas without any insurers at all offering plans.