The Affordable Care Act isn’t looking so affordable. Health insurance plans in the Affordable Care Act’s Virginia marketplace could increase in cost by an average of 16% next year, reports the Richmond Times-Dispatch. The numbers are based upon rate changes that insurers have submitted to the Bureau of Insurance ahead of a State Corporation Commission hearing.
The increases are roughly in line with the 11% average increase expected nationally based on a Kaiser Foundation survey of 14 major cities. Richmond, one of the cities surveyed, actually fares better than the state and national averages with an increase of benchmark silver plans of only 6%. Presumably, other parts of the commonwealth are faring worse.
What’s going on? In a word, adverse selection. Sick people who anticipate big medical bills are signing up while healthier people are paying the penalties (or taxes, depending upon your legal context) for not participating and then enrolling when they need the coverage.
Or as Doug Gray, executive director of the Virginia Association of Health Plans, put it to Katie Demeria with the T-D: “The problem is we haven’t gotten all the healthy people, but we have gotten most of the sick people.”
The problem was widely anticipated. Indeed, the Affordable Care Act attempted to forestall adverse selection by imposing penalties/taxes on uninsured Americans who declined to enroll. But it turns out that the incentives were not harsh enough. (It would be interesting to know how aggressively the Obama administration is enforcing the provision — strict enforcement could create a political backlash.)
Obamacare advocates said that other provisions in the legislation would keep costs under control. They don’t appear to be working. The big question now is whether the Affordable Care Act is in a death spiral — and what comes after it collapses. Does Virginia have an answer?
— JABThere are currently no comments highlighted.