Insurance companies are spooked by this possibility, so they are already raising premiums to protect themselves from potential losses. Yet this step can help create the very problem that they are trying to avoid. If premiums are high—or even just perceived to be high—young people will be more likely to avoid buying insurance, which could start the negative, downward spiral of exchanges full of the sick and elderly with not enough healthy people paying premiums.
Tuesday, May 7, 2013
Anticipate adverse selection: what if only high cost individuals buy health insurance?
President Obama's health care plan has a problem: If younger, healthier people opt not to purchase mandated health insurance, and instead pay for the penalty, then insurance "pool" will consist mainly of older, sicker, and higher cost people.