Attracting?

Dean Baker, a couple of days ago, offered a rather odd explanation of why the Obamacare healthcare exchanges are failing in many states, with major insurers losing money and pulling out of them. He says that the exchanges are, “attracting a less healthy group of patients.”

He goes on to say that insurance companies “are happy to insure relatively healthy people,” which seems fairly obvious, and suggests that the states can “require that insurers commit to insuring less healthy people on the exchanges as a condition of insuring the more healthy people on the individual market.”

Let’s see if we can parse what he’s saying here. People who are healthy buy expensive policies outside of the exchanges, while people who are sick buy cheaper policies in the exchanges. No, that doesn’t sound right.

People who buy health insurance on the exchanges rather than in the mass market do not do so because they are sick, they do so because they have lower income and receive a subsidy when using the exchanges. That subsidy applies to sick people and healthy people, but the healthy people don’t want to buy health insurance.

Obamacare was supposed to assure that healthy people would buy health insurance whether they wanted to or not, but has not delivered on that promise because the penalties are far too small. Healthy people have figured out they are better off paying the trivial penalty than they are spending a vastly larger sum on insurance they don’t want. Pundits universally claimed that no one would ever think that way, but…

As for Baker’s suggestion that states require that insurance companies remain in the exchange as a condition of remaining in the mass market, yes, they could do that. The result would be an increase in rates for the mass market to offset losses in the exchanges, which might not be too popular, especially given that popular pressure is to reduce health care cost rather than increase it.