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“Obamacare Death Spirals”: The Latest Prediction Of Doom Hits The Conservative Blogosphere

A new meme has arrived on the scene from the voices and pens of the anti-Obamacare devotees who remain more committed to frightening than informing when it comes to healthcare reform.

It’s the Obamacare “death spiral”— and it’s coming to a conservative blog near you.

Through a series of articles already going viral—thanks to a piece published on National Review Online and one by my Forbes colleague, Dr. Scott Gottlieb –we learn that the threat of impending doom ‘du jour’ comes via an allegation that, due to the poor launch of the healthcare.gov website, younger and healthier participants will now be more likely to stay away than sign up.

This, the falsely fearful argue, will result in an insurance pool jammed with older and sicker people without the required participation of younger and healthier Americans needed to balance the pools.

The result of such an event?

As insurance companies are forced to pay out more claims —due to their older and sicker participant base—without sufficient premium income from younger and healthier people less likely to call upon the insurer to pay for medical care, the insurance company is forced to raise their premium costs so they don’t loose money. As this problem builds upon itself year after year, it becomes, as it is termed in the insurance industry, a ‘death spiral’ as, sooner or later, the insurers are forced out of business when the premium costs get too high to be affordable by much of anyone.

Clearly, the authors suffer from a lack of understanding of human behavior—particularly when it comes to young people who are not given to dealing with these sort of issues until the deadline approaches…meaning we really don’t yet know anything about the potential success or failure of the insurance pools available on the health care exchanges.

If you doubt this, you might want to review what took place with the forerunner of Obamacare—Romneycare.

According to Jonathan Gruber, one of the key architects of the Massachusetts health care exchange—a program that the overwhelming majority of Massachusetts residents favor and support—and one of nation’s leading experts on all things Obamacare, “Massachusetts launched its health insurance program at the beginning of 2007 but enrollment didn’t fully flesh out for a year. In fact, it was less than 6% of the year’s total by the end of the second month. (emphasis added)

In other words, people of all ages tend to wait until the deadline is upon them before coming to grips with an obligation like purchasing health insurance. But if you have kids, you know that younger people are even more likely to delay matters such as this.

Yet, here we have the opponents of the Affordable Care Act, ready to declare the entire program DOA based on a prediction of ultimate demise via the ‘death spiral’—and all because the slow start of the federally operated state healthcare exchanges are precluding younger and healthier prospective participants from signing up during the initial weeks of availability.

Even stranger, Dr. Gottlieb argues that, as a result of the failures of the federal website launch and the negative cascading effect he suggests will likely follow, more people will be driven out of the exchanges due to higher premiums in future years. In its place, Gottlieb proposes, these people will turn to “off-exchange” policies, purchased by going directly to an insurance company, broker, etc. for policies that are not offered on the exchange.

Gottlieb writes—

“Over time, conforming and non-conforming insurance policies sold entirely outside the exchanges could look increasingly attractive to consumers; even accounting for the subsidies many people would get for staying inside the exchanges.”

Why would they do this? Because, Dr. Gottlieb suggests, the off-exchange policies will be cheaper.

Setting aside that I have no idea what Gottlieb is referring to when he speaks of “non-conforming” insurance policies as every individual insurance policy, whether available on the exchange or not, must, for all practical purposes, meet the basic benefits requirements set forth in the Affordable Care Act, I can’t quite fathom why buying less expensive insurance off the exchanges would be a bad thing.

There is a tendency among those dedicated to burying healthcare reform to miss the point when it comes to the objectives of Obamacare. They spend so much time working out how to creatively attack the law that they simply cannot recall why we needed healthcare reform in the first place.

At its core, the law is designed to do three things—get insurance company abuses under control, make healthcare coverage more readily available to virtually all Americans and institute a series of experiments designed to bend the cost curve in healthcare delivery.

This being the case, why would anyone care whether you buy your insurance coverage off-exchange or on-exchange, so long as you obtain healthcare coverage? What’s more, the  individual mandate does not require that you shop on the exchanges—it only requires you to purchase a qualifying policy.

The healthcare exchanges are designed to create competition among insurance companies. Should it not work, and Dr. Gottlieb is correct that the events occurring on the exchange will produce lower costs of an off-exchange policy—even for those who qualify for subsidies which are only available on the exchange—then we will have learned that the exchanges did not create the intended competition.

But, if Gottlieb is right and people can buy a cheaper policy that meets the requirements of the ACA off-exchange, then the objective of the law will be accomplished.

The bottom line here is that, by any reasonable and rational metric, it is far too early to know whether or not the insurance programs offered on the healthcare exchanges will manage to maintain the balance required of sick versus healthy and old versus young. In the final analysis, the doomsayers may turn out to be right. Maybe it just won’t work.

Or, maybe it will.

This is something we will simply not know for quite a few years.

Therefore, where exactly is the benefit of predicting a dire result at this stage of the game based on no available evidence whatsoever? Can there be any possible use of this information aside from giving political opponents some newly minted ammunition? Will the knowledge that insurance policies offered on the exchanges could experience a death spiral—a possibility that has existed for health insurers since the dawn of the industry—do anything to improve the odds of success?

If there is anything we can be sure of, it is that there will be a great many surprises along the way as we make these major adjustments to our healthcare system—some that will be good and some that will not.

As for the suggestion that we are in some immediate crisis because the healthcare.gov website has not yet worked as required, Jonathan Gruber, again, provides a reasonable and rational explanation of what is really happening and what it means.

USA Today reports that Gruber describes the current situation as “DEFCON 1″—a political problem, but probably not a problem yet for the marketplace.

If healthcare.gov is not running by Thanksgiving, it would be “DEFCON 2″, a real problem because people want to get insurance by January, but it’s not a crisis.

The crisis, according to Gruber, arrives if people cannot get insurance until March of 2014.

Gruber added that, in Massachusetts, officials were not focused on how well enrollment went on a day-to-day basis. They looked at the long-term potential, and expected that people would sign up in time to avoid the penalty.

Finally, Gruber noted, “I’m pretty confident they’ll have it up and going by Thanksgiving.”

So, how about we leave the death spiral stuff in the back room until the moment comes to actually haul it out and parade it around?

After all, at the rate Obamacare opponents are tossing out and using up their theories of pending disaster, they will soon run through their play book and have nothing left in their quiver.

Wouldn’t that be a shame?

 

By: Rick Ungar, Op-Ed Contributor, Forbes, October 28, 2013

October 29, 2013 - Posted by | Affordable Care Act, Obamacare, Republicans | , , , , , ,

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