Most Americans, including many Republicans, agree that it was not a good idea for insurance companies to be able to deny coverage to anyone just because of a preexisting condition. Or to base policy premiums on an applicant’s gender, age and health. Yet that’s what insurers could do pre-Obamacare. And that’s largely why nearly 50 million Americans were uninsured before the law was passed.
The insurance industry was willing to go along with a requirement that they make their policies available to everyone and that they give up their ability to set prices based on criteria like gender and health status. In exchange, insurers insisted that there be a requirement in the law that everyone be required to buy coverage.
Without the mandate to buy insurance, young and healthy people would once again opt to go uninsured, leaving the marketplace to sicker and older consumers, AHIP wrote in its brief.
AHIP cited as evidence what had happened in years past when New York and a number of other states tried to force insurance companies to accept all applicants without a mandate to buy coverage. Premiums in every one of the states spiked dramatically, and many insurers left those states’ insurance markets because of the “death spiral” that was beginning to result.
A similar spiral would result if subsidies were taken away from the newly insured in those 34 states, AHIP warned. Because 87 percent of the newly insured have such low incomes they qualified for subsidies, most of them—especially the young and healthy ones—undoubtedly would drop coverage if they had to pay the full premium.
“A sicker pool of consumers results in higher premiums, which causes an additional relatively healthy subset of participants to drop out, which in turn results in a further increase in premiums.” That, in essence, is what the death spiral is all about.
In New York, the individual market shrank from 1.2 million to 31,000 between 1992 and 2010, AHIP noted. “At that point, the only people who participated in the market were those who were very sick and affluent,” AHIP wrote in its brief.
Eliminating the subsidies for the newly insured in 34 states would quickly lead to the collapse of the individual health insurance market place in those states just as it did in New York.
Talk about a train wreck. That is one that would be truly catastrophic and injure millions.
Wendell Potter is the author of Deadly Spin: An Insurance Company Insider Speaks Out on How Corporate PR is Killing Health Care and Deceiving Americans and Obamacare: What’s in It for Me? What Everyone Needs to Know About the Affordable Care Act.