I’ve been blogging a lot over the past week or so about the risk of an insurance market "death spiral" -- where young people stay away, so the only people buying insurance are old and sick, causing the cost of insurance to rise over time and pushing ever more healthy young people out of the market.
Adrianna McIntyre says that we shouldn’t worry; there’s a provision in the Patient Protection and Affordable Care Act that deals with this.
I’ve argued in the past that delaying the individual mandate for a year wouldn’t provoke a full death spiral; it would be an uncomfortable hiccup, but it’s not enough time for the whole market to unravel. More importantly, there are deep-in-the-weeds protections baked into the Affordable Care Act: risk adjustment, reinsurance, and risk corridors.
These programs -- collectively called the “three Rs” -- aid insurers if they wind up enrolling a population that is sicker and more expensive than projected. They do a crucial bit of policy work: we want plans competing on efficiency and quality, not their ability to attract the healthiest patients.
The programs have related functions, but risk corridors will play the biggest role if the individual mandate does get delayed. Their entire purpose is to stabilize premiums during the first three years of Obamacare, when it’s especially difficult for insurers to price plans.
Here’s how it works: exchange plans (QHPs) projected how much their risk pool would cost overall in 2014, their “target” cost. If they’ve significantly miscalculated -- or, say, if a mandate delay causes adverse selection that they couldn’t have predicted -- HHS will take action.
These programs -- collectively called the “three Rs” -- aid insurers if they wind up enrolling a population that is sicker and more expensive than projected. They do a crucial bit of policy work: we want plans competing on efficiency and quality, not their ability to attract the healthiest patients.
The programs have related functions, but risk corridors will play the biggest role if the individual mandate does get delayed. Their entire purpose is to stabilize premiums during the first three years of Obamacare, when it’s especially difficult for insurers to price plans.
Here’s how it works: exchange plans (QHPs) projected how much their risk pool would cost overall in 2014, their “target” cost. If they’ve significantly miscalculated -- or, say, if a mandate delay causes adverse selection that they couldn’t have predicted -- HHS will take action.
