Tuesday, December 10, 2013


A couple of weeks ago, I wrote a post I never put up - it kind of sputtered out - and as part of that I wrote a footnote. I really wanted to post the footnote and have tried to shoehorn it into a couple different posts. I finally figured I’d just put it up on its own, a “stub”, so to speak.

In his well-worth-reading discussion of the possibility of adverse selection leading to an insurance death spiral, Yuval Levin points out that:

To provide affordable insurance to people with preexisting conditions, [the exchange system] depends on attracting millions of young, healthy Americans, many of whom do not currently have health insurance because they do not think it is worth their while to buy it, and yet it makes insurance both more expensive and less valuable for precisely those same people.

As he says, “[t]he economics of this always struck many people as implausible”.

So if, in fact, “young, healthy Americans” are not willing to carry the load in the exchanges, another group of not desperately sick people must be found to do so. In the eyes of many who support ObamaCare and particularly in the eyes of many who were unhappy about President Obama supposedly allowing cancelled policies to be un-cancelled, that group of people is made up of those currently insured through the individual market. Those who really, really want to force the currently insured into ObamaCare plans seem to assume first, that the currently insured are unwilling to go without health insurance; and second, that the currently insured are relatively healthy. The former assumption seems somewhat reasonable since these are people who have been buying health insurance, although I have some reservations. The latter assumption is more problematic.

I wonder if the assumption that those currently insured through the individual market are healthier than the uninsured (or, more accurately I suppose, than the uninsured in the same age ranges) might owe something to two wide-spread beliefs about how the individual health insurance market functioned pre-ObamaCare:

1) the belief that if someone is really sick, he can’t get health insurance in the individual market; and

2) the belief that if someone who is insured in the individual market gets really sick, she will be dropped by her insurer under any flimsy pretext.

These two beliefs would naturally lead to the assumption that everyone who is currently insured in the individual market is relatively healthy. However, the individual insurance market doesn’t really work that way and hasn’t for quite a while.

With regard to the first belief, Megan McArdle explains that it is not universally true that those who are sick cannot get insurance:

Since the Health Insurance Portability and Accountability Act passed in 1996, people with pre-existing conditions can still be covered as long as they maintain health coverage. It’s only if your coverage lapses that you run into trouble.

Can some relatively unhealthy people end up without health insurance? Yes. If someone gets sick and cannot afford his health insurance premiums, his coverage will lapse and, if his illness is the sort that could well lead to further health care costs down the road, he may well find it very difficult to get health insurance when he can again afford it. This does not mean, though, that everyone who is or was seriously ill is without individual health insurance.

With regard to the second belief, Ross Douthat links to a Kaiser Health News article explaining that insurers dropping policy holders who get sick (rescission) is rare:

Rescissions are very rare. They apply only to the individual market (less than 10% of private health insurance) and even then they occur less than 4/10ths of 1% of the time. Even when it does happen, there is almost always an appeals process where the decision is reviewed by an internal committee and often submitted to outside reviewers. Further, when insurers are wrong – as they may sometimes be – it is the job of state regulators to correct this injustice.

So the currently insured may not be as healthy as those who want to force them into ObamaCare policies believe. And, in particular, those who have been buying health insurance in the individual market and are willing to continue doing so even as ObamaCare drives up premiums and reduces benefits would seem to be those who are more likely to have health problems themselves.

No comments: