Another Surprise
At present, 25 states have opted for a federally facilitated exchange. The result is that the federal government will now have a major role in those states in expanding insurance coverage in the individual and small-group insurance markets…
[However,] in a federally facilitated exchange, the federal government will only have a direct role in regulating the health insurance plans that are sold through that exchange–and not over other health plans in the state that aren’t sold through the exchange. There is a risk that healthy people in a particular state may opt for cheaper plans outside the exchange, while sicker people opt for the exchange coverage–a phenomenon known as “adverse selection.”
Sounds like a big mess.
Only time will tell how this will directly affect the individual.
Shouldn’t healthy people pay less for their health care coverage if they incur fewer expenses?
Running 25 different health exchanges sounds like an administrative nightmare for the HHS.
This process of adverse selection means that people who struggle from chronic condition and can’t afford insurance will go through the government health exchange set up. I wonder how this new sea of consumers will affect that market, and what that means in terms of cost of the coverage and the pressure it will have on a limited supply of health care facilities.
Two enormous question marks loom over the federal exchanges. Will any carriers choose to participate in them? Will anybody buy from them?
I understand that insurers must offer the same coverages, in and out of the exchange.
So, everything being equal, one would go into the exchange to receive the subsidies.
Don Levit
Don, Outside of the exchanges community rating rules don’t apply, so insurers will be free to price according to risk. The healthiest will get a better price outside of the exchange than they would within it, assuming of course that a healthy person would want to buy the feature heavy policies mandated by the ACA. I just don’t see any carriers willing to participate in Health Insurance exchanges over the long run.
Jardenero1:
Can you provide any excerpt and link that states community-rating is not applied outside trhe exchange?
I have read something, several times, which stated that something had to be similar for plans in and outside of the exchange.
Don Levit
This may be “selection” but whether it is “adverse” or not depends on which side of the transaction you are. It may be adverse for companies in the exchange, but it is “favorable selection” for those outside of it. For every adverse there is another favorable.
“Section 1312(c)(1) and (2) of the Affordable Care Act states that a health insurance issuer must consider all of its enrollees in all health plans(other than grandfathered health plans)offered by the issuer to be members of a single risk pool in the individual market and small group market, respectively. This requirement applies to health plans both inside and outside of an Exchange for both markets.”
This prevents issuers from creating separate pools in order to segment high risk and low risk enrollees. The single risk pol requirement provides another layer of protection against adverse selection.”
Federal Register Mon. Nov. 26, 2012 Vol. 77, No.227, Part III Patient Protection and Affordable Care Act; Health Insurance Market Rules; Rate Review; Proposed Rule.
http://www.gpo.gov/fdsys/pkg/FR-2012-11-26/pdf/2012-28428.pdf.
Pages 70600, 70601.
Don Levit
I am now looking for an insurance company that will charge me $5 per year, just to give me an insurance card – no benefits. That way I “have insurance”.