Fewer health applicants than expected in Illinois – Health Care News – Crain’s Chicago Business.
Only six insurance carriers have told the state of Illinois they want to sell a combined 165 health policies on the state’s online insurance marketplace under the nation’s new health care law — numbers far lower than expected, raising concerns the trend will hold true across the country.
Fewer health plans could mean less competition and possibly higher premium prices. Officials in President Barack Obama’s home state had anticipated some 260 health plans would be offered by 16 different insurance carriers, based on a survey the Illinois Department of Insurance conducted last fall.
Here’s a good reason why…
Insurers are concerned, in part, that people who have expensive medical conditions will sign up immediately for coverage through the exchanges, while healthier customers will wait. That could leave an insurer, at least initially, without enough premium revenue to handle the medical bills it receives. They’re also concerned about how fees and coverage restrictions mandated by the law will affect the profitability of their plans.
Wow, adverse selection comes into play, who could have imagined? To prevent adverse selection a substantial penalty (err… tax?) is required to “force” everyone to sign up. With a $95 first year penalty there will be a lot of people who will “pay the penalty”.
And this line of reasoning is truly getting stale…
Fewer health plans on the exchanges could affect the cost of premiums people pay for coverage. Proponents of the Affordable Care Act say the online marketplaces will help hold down premium hikes because insurers will be competing against each other as customers compare several policies side by side to find the best match.
There have already been on-line health insurance marketplaces. It IS true that no two plans were alike, and that will still be true today. All the carriers Bronze plans will not be exactly the same. That said, they will be quite similar to meet the demand they cover, on average, 60% of their health care expenses. But to think this somehow is going to force great competition? Give me a break. For the first few years the insurance companies main fear is the adverse selection and trying not to lose a boatload of money. I don’t think they are having sleepless nights worrying about the competition, they are having sleepless nights trying to price their plans to not lose money.
I’m also going to predict (again) a different type of adverse selection. Applicants with chronic diseases requiring expensive treatments or ongoing medications are going to purchase the Platinum plans. Hence, there are going to be two types of adverse selection coming into play:
- As mentioned above, “sick” applicants will be at the front of the line to sign up for Obamacare
- The there will be inter-plan adverse selection where the sicker an applicant is, especially long term chronic conditions, the more likely they will be to sign up for the Gold or Platinum plans with better benefits. Hence, the pricing for Gold and Platinum plans will be driven up due to the higher claims experience.
Prediction: This is not just an Illinois problem. Chaos…