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Tue Dec 19, 2017, 05:07 PM

Adverse Selection and how the Republicans just killed the ACA

The whole idea of insurance is to spread the risk among the largest population. Let's say that we want to help people who get Multiple Sclerosis a terrible condition that attacks people at random. If everyone is covered by MS insurance we can amortize it over 300 million and have a per capita charge of $ 1.00 per person.

If the number of people who buy the insurance is reduced the per capita charge increases.

If we force the insurance company to provide care for all of the MS but don't require a mandate this creates a situation of "ADVERSE SELECTION";

here is how adverse selection is explained with life insurance and smokers/non smokers

The term "adverse selection" was originally used in insurance. It describes a situation where an individual's demand for insurance is positively correlated with the individual's risk of loss.

This can be illustrated by the link between smoking status and mortality. Non-smokers typically live longer than smokers. If a life insurance company does not vary prices according to smoking status, its life insurance will be more valuable for smokers than for non-smokers. Smokers will have greater incentives to buy insurance from that company and will purchase insurance in larger amounts than non-smokers. As smokers are at higher risk of early death due to their smoking status, and more smokers than non smokers will purchase life insurance, the average mortality rate increases. This increase means the insurer will spend more on policy payments, leading to losses.

In response, the company may increase premiums. However, higher prices cause rational non-smoking customers to cancel their insurance. The higher prices combined with their lower risk of mortality make life insurance uneconomic for non-smokers. This can exacerbate the adverse selection problem. As more smokers take out life insurance policies and increase the insurer's mortality rate, its prices will continue to rise, which in turn will mean fewer non-smokers will purchase insurance. Eventually, the higher prices will push out all non-smokers and the insurer will also be unwilling to sell to smokers. No more interactions will take place, and the life insurance market will collapse.

Legislative Adverse Selection occurs when legislation destabilizes the natural selection then it creates a death spiral for the insurance plan. When you mandate that the insurance company must accept everyone regardless of pre existing conditions BUT then takes away the individual mandate they are creating Legislative Adverse Selection.

If we require Health Insurance companies to cover people with pre-existing conditions but don't have an individual mandate we will set up a death spiral for the ACA.


Susan Blumenthal, M.D., Contributor

Public Health Editor, The Huffington Post; Former U.S. Assistant Surgeon General

Repealing the Individual Mandate would not only create an influx of adverse-selection by depleting the Marketplace of many young and healthy individuals who abandon the Marketplace while seeking “skimpy” insurance plans, but might also result in the Marketplace becoming victim to an exodus of individuals abandoning purchasing health insurance altogether. On November 26, 2017, the CBO reported that repealing the ACA’s Individual Mandate might increase the number of uninsured Americans by 4 million by 2019 and by 13 million by 2027 while reducing the federal budget deficit by less than originally forecast. Sick and older Americans, some of the most vulnerable individuals needing insurance coverage, would likely remain in the Marketplace and be subject to higher premium prices — projected to increase an additional 10 percent over the next decade — resulting from instability caused by adverse-selection.

Unable to kill the ACA by guillotine the Republican Senators killed by slow strangulation.

Senator Collins, Senator Murkowski and all of the others who said that they would protect the ACA and healthcare for the middle class and poor lied.

The ACA is now a dead health plan walking. It will take a couple of years but without the mandate it will be a plan that will end up only with those who have current conditions signing up for it and others opting out as premiums will start to radically increase.

This is the most cynical move possible. Keep the popular requirement mandating insurance companies must take everyone and then take away the individual mandate so that the plan becomes unsustainable.

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Reply Adverse Selection and how the Republicans just killed the ACA (Original post)
grantcart Dec 2017 OP
VMA131Marine Dec 2017 #1
VMA131Marine Dec 2017 #2
grantcart Dec 2017 #4
SharonAnn Dec 2017 #3
grantcart Dec 2017 #5
bluestarone Dec 2017 #6

Response to grantcart (Original post)

Tue Dec 19, 2017, 05:16 PM

1. Well, I expect most of the blue states to pass their own healthcare mandate

the one in Massachusetts is still on the books after all.

But the Balkanization of the United States will continue.

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Response to VMA131Marine (Reply #1)

Tue Dec 19, 2017, 05:28 PM

2. And sure enough, CT, MD and CA are already looking at imposing their own mandates...


As Congress is about to vote on a tax overhaul that will gut the Affordable Care Act's mandate that most Americans have health insurance, a number of states, including Connecticut, may consider a state-based penalty to encourage people to obtain coverage.

Nearly 60,000 individuals and families in Connecticut paid a federal tax penalty last year because they did not have health insurance coverage in 2015, a penalty imposed by the ACA's "individual mandate."

Most of those paying that penalty in Connecticut — about 50,000 tax filers — reported incomes to the Internal Revenue Service of between $10,000 and $50,000.

The final tax bill that will be voted on this week in Congress would eliminate that mandate in 2019. The result, the Congressional Budget Office said, is the number of uninsured Americans would grow by 4 million people that year and by 13 million by 2027. The CBO also estimates there would be an immediate increase of about 10 percent in premiums because the risk pool that remains would be older and sicker.

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Response to VMA131Marine (Reply #2)

Tue Dec 19, 2017, 06:27 PM

4. interesting, thanks

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Response to grantcart (Original post)

Tue Dec 19, 2017, 05:40 PM

3. The talking point against the mandate always related to "healthy people" being required to buy in.

There are NO healthy people! There are some people who are healthy at that moment. That could change with a serious accident or sudden diagnosis. Then, all of a sudden, they're not healthy.

If it were described as people who don't CURRENTLY have any medical problems, it would at least be accurate and would open to them mind to the awareness that they are only CURRENTLY healthy and that situation could change quickly.

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Response to SharonAnn (Reply #3)

Wed Dec 20, 2017, 08:00 AM

5. good point

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Response to SharonAnn (Reply #3)

Sat Dec 23, 2017, 11:30 AM

6. so very true but

younger generation DO NOT think that way. ( i was that way too) somehow need to get them to change there thinking!

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