Association Boondoggle

You have seen it here before . . .

Health plans offered by professional associations were once havens for millions of people who couldn't get coverage anywhere else. But as medical costs have soared, groups representing professions as varied as law and golf have been forced to stop offering the benefit or been dropped by insurers.

Here is a sobering stat.

Although no one tracks association coverage to know how many plans have disappeared, the experience of Marsh Affinity Services is telling. A decade ago, Marsh, which brokers and administers the health plans, had 142 such clients. Today, all but three have shut down

Why?

Insurance carriers began pulling out of association markets about 10 years ago amid mandates requiring the groups — like employers — to offer coverage to all members who wanted to buy it, regardless of preexisting conditions.

Government intervention in a free market trade.

In today's marketplace, that's almost always a better deal for older members and often the only option for people with preexisting conditions. But insurers are eager to sell individual policies to the young and healthy for as little as $100 a month, scooping the cream off the risk pool. That leaves higher-risk older and less-healthy people to the group market, resulting in what is known as adverse selection.

Wow. Who would have guessed that?

Regular readers of this site, of course.

As healthy members leave an association health plan, the concentration of members with higher-than-average medical costs increases. That forces the underwriter to raise premiums. A "death spiral" sets in, when medical costs exceed the plan's ability to raise premiums to cover them.

Death spiral. Seen it before many times.

Don't you just love government interference?