27 May 2015 An ObamaCare Death Spiral is on the Horizon
Leftists Claiming ObamaCare Critics Were Wrong About Death Spiral Jumped the Gun
Exorbitant Premium Hikes By Some Insurers for 2016 Show Insurance “Risk Pools” Do Not Have Enough Young and Healthy People
Washington, D.C. – Leftist claims that an ObamaCare death spiral won’t happen are premature, argues a new National Policy Analysis paper from the National Center for Public Policy Research.
“Pundits like Paul Krugman saw the tiny premium increases for the second year of the exchange and concluded that predictions of the death spiral were wrong,” says Dr. David Hogberg, senior fellow at the National Center and author of the paper. “But there is no rule saying that because a death spiral doesn’t happen in the first year it isn’t going to happen.”
In “The ObamaCare Death Spiral Rears Its Head,” Dr. Hogberg points out that ObamaCare’s “risk corridors” encouraged insurance companies to keep premium increases low in the first year.
“The risk corridors were going to use taxpayer money to cover a larger portion of the losses than any insurer incurred on the exchanges,” says Dr. Hogberg. “That would relieve them of any need to hike premiums in order to cover larger-than-expected medical claims.”
But in last year’s budget, Republicans stopped any taxpayer money from being used for the risk corridors.
“Now that insurers don’t have access to that money, they have little alternative but to hike premiums if they incurred losses on the exchanges,” says Hogberg. “And given some of the premium hikes they are requesting for 2016, it’s pretty obvious that they had big losses.”
- Five insurance companies on Oregon’s exchange are proposing average premium increases ranging from 25.6 percent to 52 percent.
- In Tennessee, Blue Cross/Blue Shield is asking for an average increase of 36.6 percent and Community Health Alliance is proposing a 32.6 percent increase.
- In New Mexico, Health Care Service Corp. is requesting a premium hike of 51.6 percent.
“Once premiums go up like this, you’ll see younger and healthier people begin to drop out, leaving the insurance risk pool older and sicker and even more expensive to cover. Then premiums will increase again, and the process repeats,” says Dr. Hogberg. “It’s off to the races for the death spiral. With laws like community rating and guaranteed issue governing the exchanges, this was all but inevitable.”
David Hogberg is a Senior Fellow at the National Center for Public Policy Research. His forthcoming book, Medicare’s Victims: How the U.S. Government’s Largest Health Care Program Harms Patients and Impairs Physicians, will be available July 6.
The National Center for Public Policy Research is a conservative, free-market think-tank based on Capitol Hill that was founded in 1982. Sign up for free issue alertsÂ here.