If the exchanges don’t get fixed soon, they could destroy Obamacare — and possibly, the rest of the private insurance market. The reason that the exchanges were so important was that they were needed to attract young, healthy people into the insurance system. The worry was that if insurance is hard to buy — if you have to do your own comparison shopping and then call the insurance company, and fax in some paperwork and two years of tax returns — that the young and the healthy simply won’t do it. Sick people and old people who were getting huge subsidies — and maybe the ability to buy insurance on the private market for the first time in a long while — would overcome any obstacles, because if you’re spending $15,000 a year on health care, it’s worth a lot of your time to make sure that you have insurance. But if your biggest annual health-care expense is contact lens solution, you may just decide to skip it and pay the fine.
The administration estimates that it needs 2.7 million young healthy people on the exchange, out of the 7 million total expected to apply in the first year. If the pool is too skewed — if it’s mostly old and sick people on the exchanges — then insurers will lose money, and next year, they’ll sharply increase premiums. The healthiest people will drop out, because insurance is no longer such a good deal for them. Rinse and repeat and you have effectively destroyed the market for individual insurance policies. It’s called the “death spiral,” and the exchanges, like the mandate, were designed to keep it from happening.
By the way, what we have now cost us $400 million.
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