Re: The PPACA Thread Part III - Let's have a healthy debate!
Most people don't understand at all how rate-setting works. The insurance company sets rates at the beginning of the year based on an educated guess; they really have no way to know what their experience will be: while they set rates at the start of the year, actual claims experience is only known at the end of the year. What has been happening is that
-- some people have waited until they get sick, sign up for coverage, then once they recover they drop their plan again.
-- more sick people have signed up than anticipated
-- fewer young, healthy people have signed up than anticipated
-- consequently, claims experience has been much worse than the start-of-year rates would have indicated.
One of the biggest problems with PPACA is it caps annual profits while it leaves annual losses uncapped. Just imagine, if instead of mandating a minimum annual loss ratio of 85%, the law had mandated a five-year rolling average loss ratio instead. That would have allowed some pricing stability over time. Instead, we have insurers chasing their tails; as every rate increase merely exacerbates the negative spiral outlined above.
Between risk assessment, coverage levels, and loss ratios, you can only mandate two of the three; basic mathematics requires that the third seek its own level. the law tries to mandate all three independent of each other: mathematically impossible. it is inherently unstable and never will work unless one of these three areas is freed from statutory restrictions.
There is a fairly simple and straightforward fix available, actually but the way the politics are, the Dummycrats won't entertain even the slightest hint of a single revision and the Repugnicans are too fixated on repeal to bother offering up an interim fix.
Frankly, I think Roberts deliberately sabotaged the law: by making it an optional tax when he declared the mandate unconstitutional under the commerce clause, he (a) allowed people not to sign up for coverage with a clean conscience, and (b) made it impossible to increase what once had been the "penalty" without new legislative action because all tax increases must originate in the House. He clearly understood that the mandate was the only way the law might possibly work and he removed that possibility.
Most people don't understand at all how rate-setting works. The insurance company sets rates at the beginning of the year based on an educated guess; they really have no way to know what their experience will be: while they set rates at the start of the year, actual claims experience is only known at the end of the year. What has been happening is that
-- some people have waited until they get sick, sign up for coverage, then once they recover they drop their plan again.
-- more sick people have signed up than anticipated
-- fewer young, healthy people have signed up than anticipated
-- consequently, claims experience has been much worse than the start-of-year rates would have indicated.
One of the biggest problems with PPACA is it caps annual profits while it leaves annual losses uncapped. Just imagine, if instead of mandating a minimum annual loss ratio of 85%, the law had mandated a five-year rolling average loss ratio instead. That would have allowed some pricing stability over time. Instead, we have insurers chasing their tails; as every rate increase merely exacerbates the negative spiral outlined above.
Between risk assessment, coverage levels, and loss ratios, you can only mandate two of the three; basic mathematics requires that the third seek its own level. the law tries to mandate all three independent of each other: mathematically impossible. it is inherently unstable and never will work unless one of these three areas is freed from statutory restrictions.
There is a fairly simple and straightforward fix available, actually but the way the politics are, the Dummycrats won't entertain even the slightest hint of a single revision and the Repugnicans are too fixated on repeal to bother offering up an interim fix.
Frankly, I think Roberts deliberately sabotaged the law: by making it an optional tax when he declared the mandate unconstitutional under the commerce clause, he (a) allowed people not to sign up for coverage with a clean conscience, and (b) made it impossible to increase what once had been the "penalty" without new legislative action because all tax increases must originate in the House. He clearly understood that the mandate was the only way the law might possibly work and he removed that possibility.
