Lost in a spirited online debate last week about what young, healthy people — so-called invincibles — will pay for insurance on the Obamacare exchanges is a mundane truth: Some people don’t want to buy health insurance and will refuse to buy it no matter what the government says.
That’s especially true of the invincibles, whose participation in the Affordable Care Act is crucial. If they don’t sign up for insurance on the exchanges, the federal health-care law could implode almost as soon as it goes live on New Year’s Day, 2014.
The much-hyped insurance exchanges are a centerpiece of Obamacare. Their purpose is to organize an “individual insurance market” for the self-employed and also for tens of millions of employees who will probably get dropped from their employers’ health-insurance rolls as a result of Obamacare’s premium sticker shock. Those uninsured are supposed to be able to go “shopping” for health insurance on the exchanges as easily as if they were browsing for books on Amazon.
Well, maybe not quite as easily. It remains to be seen whether the federal government even has the capacity to set up and run exchanges in the 26 states that have refused to create one, as well as in the seven states that have opted for a “partnership exchange.” The October 1 deadline, when the exchanges are supposed to begin enrollment, looks increasingly unrealistic.
But the technical details of the exchanges, and the amount that young people will have to pay, aren’t the real issue. The real question is whether young, healthy twentysomethings will even bother to sign up. If they don’t, premium costs will dramatically increase for the comparatively older and sicker people who do enroll on the exchanges — and the administration knows it.
Ezekiel Emanuel, a former Obama health-care adviser and Obamacare architect, admitted recently that “anxiety is increasing” over the exchanges. Jonathan Cohn at The New Republic is a little worried that a dearth of young enrollees could lead to what actuaries call adverse selection, or a “death spiral,” where rising premiums make healthy people drop out, driving up premiums even more until the only people left on the exchanges are those with costly medical bills. Such a spiral would result in extremely expensive insurance.
This is precisely what happened in a handful of states that in the 1990s adopted health-insurance reforms including guaranteed issue (forcing insurers to offer policies to applicants regardless of their health status) and modified community rating (limiting how much insurers can vary premiums based on factors such as age and health). Eight states adopted guaranteed-issue and community-rating reforms in the individual market in the early Nineties, and they all suffered a rapid death spiral. Premiums skyrocketed, the number of uninsured went up, and the individual market dried up as insurers pulled out.
Obamacare seeks to solve the adverse-selection problem by mandating that everyone buy health insurance, ensuring that all plans on the individual market are guaranteed issue, and providing subsidies to purchase insurance. With an individual mandate, so the thinking goes, younger and healthier people will have to stay in the market, and premium costs will remain low. But if the young and healthy ignore the mandate, some form of death spiral is bound to ensue, as it has in the past.