Slate - "Trumpcare Might Break the Insurance Market"

[NRaleighLiberal]

http://www.slate.com/blogs/moneybox/2017/03/10/why_trumpcare_might_break_the_insurance_market.html

by Jordan Weissmann

Republican leaders have claimed that their new health care legislation will finally stabilize America's wobbly insurance markets, which under Obamacare have failed to settle down in many states. Unfortunately, there are strong reasons to worry that their proposal would make the damage worse in some markets—and maybe collapse them entirely.


The reason why boils down to two words: adverse selection. That's the troublesome situation in which customers wait until they get sick to buy health coverage. When it occurs, carriers tend to lose money and pull out of the market; after all, nobody wants to run an insurance business enrolling nothing but congestive heart failure and cancer patients. This has been something of an issue under Obamacare, which banned companies from discriminating against patients with pre-existing conditions, but tried to keep the markets functioning Americans to buy insurance or pay a tax penalty under the individual mandate. Combined, the two rules were supposed to create a balanced risk pool of healthy and sick customers. But the mandate has been less effective than the law's architects hoped, and many insurers have ended up with an older, sicker customer base than they first anticipated. That's created problems like higher premiums, and left many counties with just a single insurer on the Affordable Care Act’s exchanges as companies have stopped selling plans.

As I wrote on Tuesday, Trumpcare, in theory, could make the adverse selection problem much worse. That's because it keeps Obamacare's pre-existing condition rules intact while nixing the individual mandate. In its place, the law would allow insurers to charge new customers 30 percent extra for a year if they'd previously gone 63 days uninsured. This rule is supposed to encourage people to stay covered, lest they pay a penalty. But in some ways, it creates the exact opposite incentive. Where the individual mandate bites people each year that they don't buy coverage, Trumpcare's penalty doesn't hit until someone buys coverage, and only then makes it more expensive. So once people go two months uninsured, it encourages them to delay buying coverage for as long as possible.

So the incentives are kind of perverse. But how strong are they? We can get a rough sense from the chart below, which was put together by Caroline Pearson, a senior vice president at the health care consulting firm Avalere. It compares how much a 27-year-old would pay for going uninsured under the individual mandate and how much he or she might pay under the Trumpcare penalty. The first striking thing, which Vox's German Lopez noted earlier this week, is that the Republican proposal hits lower-income Americans hard. Today, those earning less than 300 percent of the poverty line pay $695 under the mandate. Under Trumpcare, the equivalent of a bronze plan could cost them about $1,000 extra. Upper-income young people would end up paying less than today.

snip - more, including charts

[d_r]

2. I have realized

That there is a segment of the population without kindness or compassion or hope for their own future, he desire to find joy in watching the world burn.

[Ms. Toad]

3. I raised that question in another thread.

A 30% penalty for a single year is nothing, if it gets me access to coverage for an illness of any significance.

What I wasn't sure of is whether the penalty was for a single year (or forever, which is a very different calculation).