Op-Ed Columnist - California Death Spiral - NYTimes.com
It looks like the unraveling of our insurance system may have just began. Its pretty obvious that the collapse would have started in the most expensive and risky market, individual insurance.Here’s the story: About 800,000 people in California who buy insurance on the individual market — as opposed to getting it through their employers — are covered by Anthem Blue Cross, a WellPoint subsidiary. These are the people who were recently told to expect dramatic rate increases, in some cases as high as 39 percent.
Why the huge increase? It’s not profiteering, says WellPoint, which claims instead (without using the term) that it’s facing a classic insurance death spiral.
Basically whats happening is that as insurance prices go up, more people who don't need insurance at the moment are dropping it, which worsens the risk pool, causing a downward spiral.
I think this problem will affect company provided insurance at some point to. The company I currently work for is doing some fairly drastic things to try to keep insurance cost inflation under 7%. We are losing a lot of benefits because of it. Eventually, that camel's back is going to break.
I tried to find comparisons between California and other states, but I was not successful. But the fact is, that if we sold insurance across state lines (which probably isn't a bad idea) the only real effect it looks like it would have is to slow down the deterioration. For exampleMore broadly, conservatives would have you believe that health insurance suffers from too much government interference. In fact, the real point of the push to allow interstate sales is that it would set off a race to the bottom, effectively eliminating state regulation. But California’s individual insurance market is already notable for its lack of regulation, certainly as compared with states like New York — yet the market is collapsing anyway.
1. California's insurance melts down, as it is currently doing.
2. People start buying insurance from other states, however premiums continue to increase faster than inflation, meaning fewer people can afford it every year.
3. Healthy folks begin to drop out, the risk pool gets worse and we are back to the spiral.
I think we are getting to the point where we have to do something drastically different. The only way any type of insurance is going to be saved is if we fix the risk pool, but mandatory medical insurance is a very unpopular idea.
So given these new developments, what do you guys propose we do to fix this market, or do you think we would be better off if we let the thing fail and go back to direct payments to doctors? Whatever your opinion is, why?