Wednesday, November 20, 2013

Rubio on his anti-bailout bill: The insurance industry under ObamaCare is headed for a death spiral



Remember, the “risk corridor” (a.k.a. bailout) provisions of the law say that if a plan on the exchange comes in slightly under budget, the insurer has to cut a check for the difference to HHS. If it comes in slightly over budget, HHS cuts a check for the difference to them. - HOTAIR

Without those provisions, an insurer who came in way over budget would need to charge higher premiums next year to cover its loss, and higher premiums are the first baby step towards a “death spiral” — premiums increase, healthy people decide the new premiums are too expensive and drop the plan, the remaining risk pool is thus older and sicker, then the insurer has no choice but to increase premiums again, and on and on. Eventually premiums become so expensive that there’s not enough healthy people left in the risk pool to keep it afloat and the plan goes belly up.