20 Jun 2013 Oregon Health Exchange’s Coming Death Spiral
From my article in the American Spectator today:
Thus, the Oregon exchange will likely suffer the same fate as California’s, a death spiral. As the younger and healthier people realize that the price of insurance is more than the fine and that guaranteed issue rules force insurers to sell them a policy even when they get sick, they’ll have substantial incentives to forgo insurance until they actually need it. That generally means that those who remain in the insurance pools are older and sicker, which means insurance prices will rise. Then even more young and healthy people drop their insurance, leaving the pools even older and sicker than before, and so on. Eventually all but a few insurers will drop out because they can no longer make a profit on the exchange.
We’ve seen this happen before, as documented by the late health-care scholar Conrad Meier. As he noted, eight states in the early 1990s “reformed” their individual markets with community rating and guaranteed issue regulation and saw those markets enter a death spiral.
But instead of learning from this lesson of history, the social engineers who gave us Obamacare gambled that they could avoid a death spiral with subsidies and an individual mandate. Like most social engineers, they got to gamble with other people’s money and other people’s lives. It will be largely other people who suffer when their grand plans turn out to be wrong yet again.