Assessing the Exchanges | National Review Online

Read and weep. My comments in [brackets]:

…[interviews with medical insurance policy-type reps in Washington]

One key worry is based on the fact that what they’re facing is not a situation where it is impossible to buy coverage but one where it is possible but very difficult to buy coverage. That’s much worse from their point of view, because it means that only highly motivated consumers are getting coverage. People who are highly motivated to get coverage in a community-rated insurance system are very likely to be in bad health. The healthy young man who sees an ad for his state exchange during a baseball game and loads up the site to get coverage—the dream consumer so essential to the design of the exchange system—will not keep trying 25 times over a week if the site is not working [1]. The person with high health costs and no insurance will [2]. The exchange system is designed to enable that sick person to get coverage, of course, but it can only do that if the healthy person does too [3]. The insurers don’t yet have a clear overall sense of the risk profile of the people who are signing up, but the circumstantial evidence they have is very distressing to them [4]. The danger of a rapid adverse selection spiral is much more serious than they believed possible this summer [5]. They would love it if the administration could shut down the exchange system, at least the federal one, until the interface problems can be addressed. But they know this is impossible [6].

via Assessing the Exchanges | National Review Online.

A terrifically scary article (read it all ™), but this paragraph has so much implied information in it it jumped out as needing some amplification.

1: Why would he? He’s actuarially bulletproof, and has as much need of medical insurance as he does a 401k (unemployment joke), but seriously: this youngster is the basis for paying the ACA bills. If the young and healthy and unlikely to need medical insurance don’t sign up the ACA insurance house of cards collapses (see next):

2: Why wouldn’t they? This is the group the ACA is aimed at, those who can’t get insurance at all, or who have it (Cobra, etc), but for this group insurance is prohibitively expensive. Were I in their shoes I’d be hitting this site 18 hours a day and not quitting until I got insurance and a subsidy. Hint, this group is very to horrifically expensive, and require their costs to be spread far and wide for insurance to work.

3: To belabor the point, insurance companies don’t print money to pay bills, they transfer money from the payments of those paying for insurance who don’t wind up using it to the bills of those who do. Therefore not enough insured paying (but not using) the insurance company runs out of money, then the insured aren’t insured when the company goes broke. That’s ungood.

4: Insurance companies understand medical cost risk like no other group, and were this good news for them (non-distressing news) they’d be singing this to the heavens/news, as a way to sign up the [1] group. Then it’d be ‘cool!’, which would cascade into more young/well signups.

5: This is inexplicable. Insurance companies abhor risk, this was a completely foreseeable risk in an unknown situation, unless there were some significant assurances from On High that Nothing Can Go Wrong. Which they would be dumb to just swallow whole. This part of the mechanism of bargaining still bugs me, as I don’t have an explanation for why an entire, smart and profitable industry would buy into a scheme that could destroy it quickly and painlessly. Remember this, they walked into the ACA eyes wide open.

6. It’s hard to stop a process bought into under a combination of duress and greed, either objection draws credibility into question.

No secret, I’m totally against (and aghast at) the ACA. That said, it’s more than curious a nation that put men on the moon with slide rules cannot make an insurance marketplace with roughly a half a billion dollars and a three year head start.

Interesting times.