By David Hogberg, The Federalist
Even if King v Burwell case fails at the U.S. Supreme Court next month, the future for the ObamaCare exchanges is still far from assured. Even if people on the 37 federal exchanges get to keep their subsidies, chances are they will eventually be caught in the vortex of the “death spiral.”
A death spiral occurs when not enough young and healthy people sign up for health insurance. Thanks to Obamacare’s design, a death spiral is inevitable. Here’s why.
Obamacare’s community rating results in insurance prices that are higher for younger people than they would be in a free market, and its guaranteed issue allows people to sign up for insurance even if they get sick, so young and healthy people have ample incentive to forgo insurance. This leaves the insurance “risk pool” older and sicker and, hence, more costly to insure. Premiums will have to rise to cover those costs, leading some of the younger and healthier people who did initially sign up to then drop out. The risk pool then becomes even older and sicker, premiums rise again, and the process repeats.
A study by the late Conrad Meier examining the effect of these laws on eight states shows that premium hikes of at least 20 percent (and usually higher) are the canary in the coal mine for a death spiral.
Is the Death Spiral Bogus?
Leftist economist Paul Krugman strongly disagrees: “There is no death spiral: On average, premiums for 2015 are between 2 and 4 percent higher than in 2014, which is a much slower rate of increase than the historical norm.” The lack of death spirals “should inspire major doubts about [conservative] ideology.”
Who says a death spiral prediction is completely wrong if a death spiral doesn’t occur immediately?
Yet, he complains, those who made predictions about death spirals aren’t admitting their errors but “pretend that [they] didn’t make the predictions [they] did.” This is serious stuff, since refusing “to accept responsibility for past errors is a serious character flaw in one’s private life. It rises to the level of real wrongdoing when policies that affect million of lives are at stake.”
