The right's hypocrisy over ACA

[stpioc]

Right-wingers have predicted a so called death spiral for the ACA (Obamacare) from the start.

A death spiral is the situation that only the sickest people insure themselves, leading to an increase in premiums and leaving of healthy people.

They are now rejoicing after another big insurer left many of the exchanges (although it looks like this was more the result of a blocked merger).

However, the thing to keep in mind is that such a death spiral is the consequence of a market failure, called adverse selection.

As in any insurance market, insurers want the best risk, whilst the worst risk have by far the biggest incentives to insure themselves.

This produces adverse selection, that is, the risk of the insured population is significantly higher than that of the general population.

We can't stress enough that this is a market failure. Left by its own devices, adverse selection is a market outcome.

The ACA actually is an effort to remedy this. Before the ACA, insurance companies had ways of dealing with adverse selection, like:

• Refusing people with pre-existing conditions
  
• Limiting, or even denying payments (the small print in your policy..)
  

The results were a disaster:

• The market left tens of millions uninsured, often the most vulnerable people with the lowest means and/or the biggest health problems. That is, the market outcome left a huge demand for medical needs unmet.
  
• People were afraid to change jobs, reduce the amount of hours worked (for instance to take care of children or sick relatives), or start their own companies out of fear of losing health coverage.
  
• Medical debts are the single biggest source of personal bankruptcies
  
• The uninsured draw on emergency care (Medicaid). Apart from serious health consequences (earlier visit to a doctor often prevent things getting much worse), this is very inefficient as the cost to society are higher than if they would have been insured.
  

How does the ACA remedy this?

• End discrimination on the basis of pre-existing condition
  
• Personal mandate; people have to get insurance to avoid the adverse selection, that is only the sickest taking up insurance.
  
• Subsidies for those that cannot pay the premiums.
  

All three are necessary, you can't have the end of discrimination on the basis of pre-existing conditions without the other two. It's not perfect, but so far it has led to a big drop in the uninsured rate.

But now a few insurers are leaving some exchanges because the the newly insured turn out to be somewhat older and sicker, the right is rejoicing, "we told you so, death spiral.."

However, it is really incredibly opportunistic for the right to blame this on ACA:

• Blaming ACA for a market failure from people who waged war on ACA as big government is incredibly disingenuous.
  
• A part of insurance companies leaving is simply the outcome of the normal competitive process of the exchanges, which are markets. Markets weed out profitable from non profitable business model, and the exchanges are not really different in kind.
  
• The ideological war waged by the right on ACA can itself be blamed for at least part of the problems, as it's likely it kept many young and healthy from signing up, worsening the risk pool (that is, adverse selection).
  

On the latter point, here is The Economist:

The main challenge, however, has been political. It is hard to implement a law when opponents want it obliterated.

We might add another quote from that Economist article:

The furore over Obamacare is baffling to the rest of the world. Most rich countries have universal coverage; developing countries are trying to introduce it. Yet in America, home to the world's biggest health system, the fight over insurance is vicious enough to bring government to a halt.