Category Archives: Health Care Reform

On the role of health insurance as an "enabling technology" that facilitates risky behaviors…

ACA Ad The vast majority of the ads shown on the www.doyougotinsurance.com website promote health insurance as an “enabling technology” that facilitates various risky behaviors; e.g., uncelibate sex, binge drinking, bungee jumping, white water rafting, etc. These ads are (condescendingly and stereotypically) targeting millenials whose overpriced premiums are needed in order to cross-subsidize premium costs for older, sicker people. It turns out that the financing model underlying the so-called Affordable Care Act (ACA) critically depends upon such cross-subsidies in order for ACA to be financially sustainable. Without these cross-subsidies, the more likely outcome for ACA is what Cutler and Zeckhauser (1998; cf. http://dx.doi.org/10.2202%2F1558-9544.1056) refer to as an “adverse selection death spiral” (see also AEI Resident Fellow Scott Gottleib’s Forbes piece on this very same topic @ http://is.gd/jnh04G). Since the ACA is designed to vastly expand Medicaid and offer subsidies to households with incomes up to 400% of the federal poverty level, then somebody has to pay for it. And if the plan works as it is supposed to, young middle class workers will have to enroll in droves to pay for overpriced insurance. However, based upon the early returns from enrollment at the Federal and state websites, this does not appear likely. Thus the aggressive ads designed to convince otherwise reticent millennials to sign up for overpriced insurance.  Apparently health insurance can be “fun” because it makes it possible to not have to fully internalize the costs of risky behaviors.  This would be the Peltzman effect on steroids… The aforementioned website (doyougotinsurance.com) is “…a project of the Thanks Obamacare campaign, created by the Colorado Consumer Health Initiative and ProgressNow Colorado Education to educate everyone about the benefits of the Affordable Care Act.”  ]]>

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On the role of health insurance as an “enabling technology” that facilitates risky behaviors…

ACA Ad

The vast majority of the ads shown on the www.doyougotinsurance.com website promote health insurance as an “enabling technology” that facilitates various risky behaviors; e.g., uncelibate sex, binge drinking, bungee jumping, white water rafting, etc. These ads are (condescendingly and stereotypically) targeting millenials whose overpriced premiums are needed in order to cross-subsidize premium costs for older, sicker people. It turns out that the financing model underlying the so-called Affordable Care Act (ACA) critically depends upon such cross-subsidies in order for ACA to be financially sustainable. Without these cross-subsidies, the more likely outcome for ACA is what Cutler and Zeckhauser (1998; cf. http://dx.doi.org/10.2202%2F1558-9544.1056) refer to as an “adverse selection death spiral” (see also AEI Resident Fellow Scott Gottleib’s Forbes piece on this very same topic @ http://is.gd/jnh04G).

Since the ACA is designed to vastly expand Medicaid and offer subsidies to households with incomes up to 400% of the federal poverty level, then somebody has to pay for it. And if the plan works as it is supposed to, young middle class workers will have to enroll in droves to pay for overpriced insurance. However, based upon the early returns from enrollment at the Federal and state websites, this does not appear likely. Thus the aggressive ads designed to convince otherwise reticent millennials to sign up for overpriced insurance.  Apparently health insurance can be “fun” because it makes it possible to not have to fully internalize the costs of risky behaviors.  This would be the Peltzman effect on steroids

The aforementioned website (doyougotinsurance.com) is “…a project of the Thanks Obamacare campaign, created by the Colorado Consumer Health Initiative and ProgressNow Colorado Education to educate everyone about the benefits of the Affordable Care Act.”

 

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The Affordable Care Act, adverse selection, and the “insurance death spiral”

The so-called Affordable Care Act provides a superb “real world” study of the consequences of adverse selection. This is further analyzed and illustrated in a Forbes article which was published today on the forbes.com website. The author of the article is Dr. Scott Gottlieb, who holds a research appointment with the American Enterprise Institute in Washington, DC. Also see “Adverse Selection – a definition, some examples, and some solutions” and the Wikipedia article about adverse selection (@ http://en.wikipedia.org/wiki/Adverse_selection).


Obamacare Faces A ‘Death Spiral’ — But It Turns On The Declining Participation Of Health Plans, Not Just Rising Premiums

www.forbes.com

“Given the failed launch of Obamacare, there’s a real chance that the entire scheme falls into an “insurance death spiral” — but not as visibly (or rapidly) as the way these sorts of unsuccessful insurance pools usually unravel. A death spiral happens when only the sickest beneficiaries get into an insurance pool, causing the cost of medical claims to rise, and in turn raising future premiums. These higher premiums, in turn, dissuade healthier beneficiaries from buying coverage. This exacerbates the strains and makes sure the pool continues to attract only the sickest consumers who are most in need of the medical coverage, and willing to pay the rising premiums. This is how the downward spiral ensues.”

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The Affordable Care Act, adverse selection, and the "insurance death spiral"

in a Forbes article which was published today on the forbes.com website. The author of the article is Dr. Scott Gottlieb, who holds a research appointment with the American Enterprise Institute in Washington, DC. Also see “Adverse Selection – a definition, some examples, and some solutions” and the Wikipedia article about adverse selection (@ http://en.wikipedia.org/wiki/Adverse_selection). Obamacare Faces A ‘Death Spiral’ — But It Turns On The Declining Participation Of Health Plans, Not Just Rising Premiums www.forbes.com

“Given the failed launch of Obamacare, there’s a real chance that the entire scheme falls into an “insurance death spiral” — but not as visibly (or rapidly) as the way these sorts of unsuccessful insurance pools usually unravel. A death spiral happens when only the sickest beneficiaries get into an insurance pool, causing the cost of medical claims to rise, and in turn raising future premiums. These higher premiums, in turn, dissuade healthier beneficiaries from buying coverage. This exacerbates the strains and makes sure the pool continues to attract only the sickest consumers who are most in need of the medical coverage, and willing to pay the rising premiums. This is how the downward spiral ensues.”
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Today’s page 1 Wall Street Journal story…

This (an article entitled “Software, Design Defects Cripple Health-Care Website“) is THE page 1 story in today’s issue of the Wall Street Journal. It provides a fascinating case study which corroborates historian John Steele Gordon’s essay from May 2009 entitled “Why Government Can’t Run a Business” (available from http://on.wsj.com/BZpZW); in that essay, Gordon notes (among other things) that “Politicians need headlines. Executives need profits.”

Software, Design Defects Cripple Health-Care Website

online.wsj.com

The federal government acknowledged for the first time Sunday it needed to fix design and software problems that have kept customers from applying online for health-care coverage.

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Today's page 1 Wall Street Journal story…

Software, Design Defects Cripple Health-Care Website“) is THE page 1 story in today’s issue of the Wall Street Journal. It provides a fascinating case study which corroborates historian John Steele Gordon’s essay from May 2009 entitled “Why Government Can’t Run a Business” (available from http://on.wsj.com/BZpZW); in that essay, Gordon notes (among other things) that “Politicians need headlines. Executives need profits.” Software, Design Defects Cripple Health-Care Website online.wsj.com

The federal government acknowledged for the first time Sunday it needed to fix design and software problems that have kept customers from applying online for health-care coverage.
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Aetna CEO Sees Obama Health Law Doubling Some Premiums

Aetna CEO Sees Obama Health Law Doubling Some Premiums – Bloomberg.

From Bloomberg News: According to Aetna Inc.’s chief executive officer, health insurance premiums may as much as double for some small businesses and individual buyers in the U.S. when the Affordable Care Act’s major provisions start in 2014…

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