Welcome to the death spiral.
Not to be confused with Sarah Palin’s “death panels,” the death spiral is how health economists describe the vicious cycle that could tear apart our health-insurance market. Obamacare opponents warned that the law was too flawed to avoid the downward spiral. Now it appears we’re in the early stages of it.
Here’s how it goes: If newly insured persons are older and sicker than the general population, they will drive up the expenses their insurer must cover. The insurer will raise premiums to make up for its losses, driving away even more relatively young and healthy consumers.
The losses increase again. Premiums go up again. Lather, rinse, repeat.
Last year’s double-digit premium increases were worrisome, but not enough on their own to send the market into a spiral. Most insurers stayed in the market, so competition was still fairly strong.
That was then. This is now.
Earlier this year, United Healthcare announced it was pulling out of most state exchanges for 2017, including Georgia's. The bigger blow came this week, when Aetna said it was doing the same .
United Healthcare was a relatively small player in Georgia, but Aetna insured far more of the Georgians who bought health coverage on the state’s Obamacare exchange this year. Tens of thousands of people will need new plans.
Just as bad was the reason the company gave for leaving all but four states’ exchanges. In two and a half years, Aetna racked up $430 million in pretax losses in the individual insurance market.
"Providing affordable, high-quality health care options to consumers is not possible without a balanced risk pool," CEO Mark Bertolini said in a statement . "Fifty-five percent of our individual on-exchange membership is new in 2016, and… in the second quarter we saw individuals in need of high-cost care represent an even larger share of our on-exchange population. This population dynamic, coupled with the current inadequate risk adjustment mechanism, results in substantial upward pressure on premiums and creates significant sustainability concerns."
That’s insurer-press-release talk for: Let us off this death spiral, y’all!
Next year, most parts of Georgia will have their fewest individual-insurance options since the exchange opened. One in six Georgians shopping on the exchange this fall will see only one insurer listed, according to my analysis of information provided by the state insurance commissioner’s office. Another one-sixth will have no more than two. Combined, that’s 3.4 million people.
This isn’t about the troubles of rural health providers. Among the cities with only one insurer are Augusta, Albany and Valdosta. Those with just two include Macon, Warner Robins and Gainesville. Outside metro Atlanta, those cities are about as big as it gets in Georgia.
Worse, the insurers remaining in Georgia requested another round of double-digit rate increases for next year — and that was before Aetna announced its withdrawal (state officials are due to rule on those by Tuesday). If Aetna is leaving because its risk pool wasn’t balanced enough, what do you think will happen to other companies’ pools when those folks jump in?
Prices sure won’t be going down. Another turn in the spiral.
Liberals, if they even admit these failures, will point to them as reason for more government “solutions,” such as single-payer. But Washington has shown it won’t make things better by doing more. We need to go the other way.
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