Wednesday, November 13, 2013

Risk Adjustment, Risk Corridors, and Reinsurance: Understanding the Death Spiral in Obamacare's Exchanges

One month after the worst product launch in modern history (yes, worse than “New Coke”), the big question is: Will the federal government be able to rescue health insurers who will lose lots of money in the ObamaCare exchanges?

The Wall Street Journal reported on November 4th that young people are avoiding the exchanges in droves. Priority Health, a Michigan insurer, reported that the average age of new applicants is 51, versus 41 in the previous individual market.

It certainly looks like health insurers’ ObamaCare exchange adventure will be very expensive. By 2015, they will likely be asking the federal government for a bail out. The Administration has no flexibility in this regard. Finally, the initiative will fall to the House of Representatives, which has pledged to repeal ObamaCare. It will be an interesting negotiation.

Read this entire article at John Goodman's Health Policy Blog  or at the Independent Institute's Beacon Blog.

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