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'Ace of Spades' and Right Wing Blogosphere 'Ethics'

273
lostlakehiker6/12/2010 12:03:17 pm PDT

re: #185 blueraven

A White House official told IBD: “This is a draft document, and we will be releasing the final regulation when it is complete. The president made a promise to the American people that if they liked their health care plan, they can keep it. The regulation, when finalized, will uphold that promise.”
However, the source conceded: “It is difficult to predict how plans and employers will behave in the coming years, but if plans make changes that negatively impact consumers, then they will lose their grandfather status

What is the problem? Plans that make changes that negatively impact consumers might lose their grandfather status?

The problem is that essentially all the individually sold policies and plans now in existence will founder. How can they survive?

The account below exaggerates the problem so that it can be understood better, but a watered down version of this problem will suffice to ensure a watered down slow demise to these plans. Here’s the problem:


The rational play from the consumer side is to go without insurance and pay the fine. The fine is cheaper.

Then, if you do get sick, sick enough that paying cash is problematic, you buy insurance. Health insurance plans had a defense to this scheme up til now; they didn’t cover preexisting conditions. But not any more. So they enroll you, and you go straight into the hospital and get your surgery, and then you drop your insurance again.

This is called “adverse selection”. Almost everyone actually enrolled in the plan will be very sick, and the plan’s costs will far outstrip its premium income. It will fail.