A long time ago in a galaxy far, far away … insurers and industry experts warned of an impending Affordable Care Act (ACA) death spiral. In my mind, the term “death spiral” conjures up images of the death star while the Star Wars Imperial March song begins playing in my head.
With the “death” of the preexisting conditions restriction, an individual can sign-up for insurance after-the-fact. People are quickly learning how to game the system. For example, the Wall Street Journal on April 10, 2016, reported a 150% surge in the sale of short term health insurance policies from 2013 to 2015. These short term plans are not really short term. They can cover the entire year. The plans do not meet the ACA requirements and thus, and individual with a short term plan must pay the individual responsibility penalty.
Short term plans continue to apply a preexisting condition exclusion and a maximum benefit limit. However, in most cases, they are a fraction of the cost of an ACA-compliant plan. Healthy individuals have figured out that buying one of these policies and paying the individual mandate penalty is less expensive than the ACA-compliant plan. If the individual develops expensive health problems, they can transition over to a Marketplace plan and receive coverage for the expensive preexisting condition.
In March 2016, Blue Cross Blue Shield published a report proving that Marketplace enrollees are a more costly population than individuals covered outside of the Marketplace. In fact, the cost of care for a Marketplace enrollee in 2015 was 22% higher than an enrollee covered under an employer’s plan.
These high costs are forcing insurance companies to leave the Marketplace at an alarming pace. A sicker population and fewer insurers lead to increased premium costs. Oh …there is the Imperial March tune again.
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