Death Spiral

Years ago I worked in the health insurance industry. We used the term ‘death spiral” when talking about individual health insurance. In the days before Obamacare, people were excluded if they had preexisting conditions. Everyone started out healthy but eventually some began to have health problems. That would cause premiums to rise. The healthy ones could get insurance elsewhere so rates would rise even more. That’s the death spiral.

The term took on a different meaning once Obamacare went into effect. There was no limitation on preexisting conditions. This opened the floodgates for those with health problems. That made it necessary to attract millions upon millions of healthy people. It was the reason for the mandate. Unfortunately, far too few healthy people bought coverage. That caused the rates to rise. Health insurers are losing vast amounts of money and some are exiting the market. Meanwhile premiums are skyrocketing. Now we are in another death spiral.

President Trump and the Republicans are talking about fixing the problem. Insurers are required by law to pay out at least 85% of the premiums in claims. The only ways to lower premiums are to cut health care costs or convince more healthy people to sign up. Proposed legislation does nothing to cut costs. Eliminating the mandate will cause millions to drop coverage. That will lead to a death spiral on steroids.
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Those that enacted Obamacare and those seeking to repeal it want to totally change the individual health insurance market without having the foggiest idea how it works. Acting in ignorance only makes things worse.
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