The Health Exchange Transformation Is Almost Complete

TransformationIsAlmostCompleteI am a firm believer that the health insurance exchange concept as envisioned by the Affordable Care Act was a bad idea that was poorly implemented. In a masterstroke of stupidity, the Affordable Care Act combined health exchanges with “high-risk pool” plans. Health exchanges work reasonably well as long as the individuals are relatively healthy and health insurance from the exchanges is affordable. Since the exchanges are market-based they are fragile and largely depend on cost, trust, and goodwill for their survival. “High-risk pool” plans have been offered for many years by states to provide coverage if you have been locked out of the individual insurance market. People who purchase health insurance from high-risk pools are actually purchasing charity health care from the government. This is a completely different product than the health insurance being purchased by healthy people. The only way this combination of health exchange and high-risk pools could work is if the unsubsidized health insurance from the exchanges continued to be affordable despite the addition of high-risk pool individuals. This is where the Affordable Care Act really screwed up. The individual insurance market is a small market and the addition of high-cost individuals has already caused health insurance premiums to soar and for the cost sensitive, healthy people to start seeking a lower cost alternative. We have already begun to see the beginning of a death spiral in the health exchange as more and more healthy people leave in response to higher insurance premiums and out of pocket costs. At some point the only people left are the high-cost individuals and the exchange is transformed back into a high-risk pool. It was when I was reading this article, Obamacare’s Cost per Beneficiary Explodes with Shrinking Enrollment, that I realized that the transformation is almost complete and the exchange in its present form will never be a properly functioning, broad-based, market for health insurance. There is no way the Affordable Care Act supporters can argue that the high-risk pool version of the exchange is a step forward. We spent a lot of money and time making an exchange that does not work and will likely never work. In order to re-establish the cost, trust, and goodwill we had before the Affordable Care Act, we have to go back and humbly offer a health exchange where healthy people matter again.