Why Private Insurers Need Reform

So there’s been a sort of weird cognitive dissonance — or at least a gaping lacuna — when it comes to discussions of health care reform and private insurance. In particular, reformers have noted that if reforms fail to include an individual mandate, private insurers will be subject to rapid implosion as guaranteed issue (no discrimination on pre-existing conditions) means that insurers can no longer stay afloat through adverse selection. Of course, the enormous problem with this line of thought is that by definition, you really can’t stay afloat through adverse selection — you can only slow the rate of your drowning. New census data illustrates the point:

As you can see, with the notable exception of the government run Medicaid, Medicare, TRICARE, and VA, insurance is down across the board. The are lots of explanations, but jump in Medicaid is obvious. As both poverty and health insurance premiums have increased over the past several years, more and more people are only able to get health insurance through a government option designed explicitly for the indigent and otherwise uninsurable. And as the pool of people able to afford insurance shrinks, so too does the ability of insurers to pay for those who actually require care, forcing them to shrink the pool further. It’s a cycle that only leads to their demise.

That is, unless we pass universal health care that mandates everyone receive coverage. Ironically, the fate of the private health insurance industry lies in the hands of reformers.


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