This is something that’s been puzzling me for a few weeks. We all know that insurers are very good at making sure that they insure healthier risks than average. In the individual market they do this openly, by underwriting against poorer risks. Those “risks” (who are most of the people with the really tragic stories) end up uninsured or in massively over-stretched state major risk pools.
But there’s a market in which insurers already operate that has guaranteed issue and no underwriting—just the reforms that AHIP is saying that it’ll accept as part of a universal coverage plan. And in that market the same process goes on. That market is of course Medicare in which Medicare Advantage plans are so good at risk selection that their being paid 12% more than what the standard FFS program would pay for the care of those self-same patients. Essentially private insurers are able to game the system by taking the more profitable patients and leaving the less profitable (and sicker) ones in the public plan.
As far as I can tell the regulation that AHIP is promoting would put them in a similar position to the role they play in Medicare in the commercial insurance market. But without a place to dump the people they don’t want to insure.
So here’s your quiz. If insurers need a place to risk-select against which they know will have to take the patients they don’t want, why is AHIP opposing a public plan?