An immutable truth of any market is sellers and buyers must be able to get together on mutually agreeable terms and conditions and do so on a sustainable basis. If that doesn’t occur, markets grow weak and eventually fail. Sellers withdraw and buyers don’t buy. That has certainly been happening in the individual medical insurance market. Some health plan issuers have pulled back their offerings in many states for the current plan year. Many consumers are reluctant buyers, accustomed for decades to all inclusive, low co-pay managed care plan model. They naturally see individual plans that come with both high premiums and high out of pocket costs as a poor value, expecting a greater inverse relationship between the two. Particularly if they don’t benefit from premium and cost sharing subsidies.
That’s not a prescription for long term buy side support. The Patient Protection and Affordable Care Act forces sellers and buyers of individual plans together by requiring sellers to sell regardless of an individual’s medical history and buyers to buy under pain of paying an income tax penalty for not having some form of continuous, credible coverage. But even those efforts to prop up the market appear less than certain to achieve a robust, well-functioning market. The big questions for the incoming administration and new Congress are:
- Whether the individual medical insurance segment that covers a sizable and growing portion of the working age population can sustainably function as a market?
- To what extent government policy should support the market and does the political will exist to do so?
- If the market should be left intact, what must be done to make it actuarially viable over the long term and avoid its tendency toward adverse selection?
Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email