Race to the bottom in the
ObamaCare exchanges
Townhall – John C. Goodman –
9/28/2013
Attracting the healthy,
avoiding the sick. In most states today insurers are allowed to charge
individuals premiums that reflect their expected health care costs. This
practice is no different than it is in life insurance, casualty insurance or
most any other kind of insurance. In a free market, you expect to pay premiums
that are actuarially fair.
The Affordable Care Act will
end this practice. Instead, insurers will be required to practice a form of
community rating, under which the healthy and the sick will all be charged the
same rate.
If the healthy are
overcharged so that the sick can be undercharged, then insurance companies can
expect to make profits on the healthy and losses on the sick. This means that
it is in the self-interest of every insurer to attract the healthy and avoid
the sick.
As a result, we
are getting a race to the bottom on access ? with private plans in the
exchanges looking increasingly like Medicaid, just as they do in Massachusetts.
The Obama administration
doesn't seem to be bothered by this development. In fact they have been touting
the fact that the premiums have been lower than expected, even though the
reason is that the networks are narrower and skimpier than expected.
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