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Health Care Death Spiral

Written by Kerby Anderson October 14 - 2014
Most of the concern expressed about Obamacare focuses on the immediate impact while ignoring the long-term effects of the law. Dr. Merrill Matthews explains in a recent column that the bigger problem will arise in a few years. Insurance actuaries call this problem a health care "death spiral." In the near term, many will experience "sticker shock" when they discover how much their insurance premiums will cost them. Those most affected will likely be young and healthy people who live in states that managed to keep health insurance premiums relatively low. On the other hand, people with chronic illnesses or other expensive medical conditions will be joining exchanges. Many of the larger health insurers are avoiding these exchanges because they believe that just such people will be joining the exchanges and have medical conditions that will be expensive to treat. The costs might exceed the premiums they were able to collect. Meanwhile the young and healthy are likely to avoid joining an exchange since they will be charged much more under Obamacare than they would have paid in the past. The law is designed to overcharge the young and healthy so that older and sicker people can be charged less. The latest HHS ads are an attempt to get young people to sign up. The problem only gets worse in subsequent years. As a disproportionate number of sick people enroll in the pool, the cost of an insurance policy will rise. These premium increases will drive healthy people out of the pool looking for lower rates that match their healthy condition. As the pool get smaller and sicker, rates will go up once again. That will drive out another wave of people until the pool is very small and very sick. This is what insurance actuaries call a "death spiral." Put simply, the challenge at the moment is to get young and healthy people to sign up for exchanges. But the bigger challenge in the future will be to get them to stay once they find out how unaffordable Obamacare is for them.   http://ncfr.net/ncfr.net/subdomains/commentary/Downloads/Kerby_Anderson/10-14-2014.mp3

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