Monday, October 19, 2009

Baucus Bill = Death Spiral of Higher Premiums

The problem the Democrats have here is that they are trying to get a health bill to cost under $1 trillion. That has made them back off on premium subsidies and policy benefits. They have had to back so far off that proposals are not offering health insurance policies anything close to being affordable for middle class families.

The political response in Senate Finance has been to waive the individual mandates but keep the underwriting reforms.

The sum of it all is a health insurance market disaster in the making. In the business we refer to it as a "death spiral." Simply, the higher the premiums go the fewer that will buy, the sicker the pool, the higher the premiums go once again, even fewer people are left in the pool, and so on until all of the sick are in the pool and all of the healthy have left it.