January 14, 2014
Such results were in fact entirely expected by those, including your humble columnist, who warned of “adverse selection.” ObamaCare severely limits insurers’ ability to set premiums based on policyholders’ risk profiles. They may not charge the already-sick more than the healthy, and their ability to charge the middle-aged more than the young is highly constrained.
That means that young and healthy policyholders get soaked in order to subsidize middle-aged and sick ones, so that the former–who had a low propensity to be insured even when premiums reflected their low risk–have a strong disincentive to purchase coverage. Given such a risk pool, premiums can only become less affordable when insurers adjust them in the coming years.
Reuters’ figures are very close to those we found in November when we looked at enrollment figures from California, supposedly ObamaCare’s great success story. The Golden State was boasting that 22.5% of its enrollees were between 18 and 34, slightly higher than that age cohort’s 21% of the state population. But the proper denominator to use wasn’t the total population but the nonelderly adult (18 to 64) population, since the elderly are covered by Medicare and many children by Medicaid. The young cohort makes up 33.8% of California’s nonelderly adult population but, at the time we wrote, only 23.8% of nonelderly adult ObamaCare enrollees. Greatly overrepresented was the far more illness-prone 45-to-64 set.
The age distribution almost certainly understates the adverse-selection problem. Sick people of all ages have a far stronger incentive to buy insurance than do healthy ones–and since becoming sick no longer can result in higher premiums or make you uninsurable altogether, healthy people have even lesser incentives to buy insurance now than before ObamaCare. But no one will know what the sick-to-healthy mix is until insurers have compiled at least some months’ worth of claims data.
Adverse selection isn’t the only predictable ObamaCare problem now becoming a reality. National Journal reports that “insurance companies had to spend a lot of money adapting to Obamacare’s botched rollout. And unless the White House intervenes, the law could penalize them for doing it.”
We identified this problem back in October.
It’s I-told-you-so’s all the way down.