Friday, January 06, 2017

Flatline: Lagniappe

Yesterday, Patrick's excellent post really pulled back the curtains on this year's Open Enrollment fiasco season, exposing just how poorly it really went. But it actually gets better (well, for certain values of "better"). A trusted source tells me that:

"Only 40% of the people who EVER bought on [] kept coverage for 12 continuous months. 40%." Now that's a stable market"

[ed: Based on study done in Dec 2015 on data from Jan 2014 until then, but unlikely to be much different this go 'round]

What that means is that folks have figured out that gaming the system is quite easy, and lots of them have done so.

The challenge is that carriers incur acquisition costs for each policy they issue. This is pure overhead, before any claims (or, often, premiums) have been paid. If the majority of the policies issued are dropped by the client in that first year, that makes it even more difficult for carriers to make a profit. So, another reason so many carriers have dropped out of the market, leaving fewer choices and increase costs.

And there's this: many folks only buy ObamaPlans to help pay for a pre-existing condition, especially an acute or catastrophic one: insurance pays for the bulk of services rendered, then no longer needed. This results in a major loss for the carrier, and no way to recoup it (since Risk Corridors went away).

Another reason is to avoid the penalty fine tax itself, but of course for many that's nominal, and certainly a lot less than actual premiums.

Can you say "Death Spiral?"

[Hat Tip: @MikeBertaut]
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