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Still no exchange death spiral

February 22, 2017

I'm sorry to keep going back to the well on this. But - I'll make a promise. When national leaders stop falsely claiming Obamacare is in a death spiral, I'll stop writing to show that it's not.

 

In the last few days, both Paul Ryan and Trump have said on Twitter that Obamacare is in a death spiral(1). But "Death Spiral" is not just a couple random words. Like most things in the English language, these words actually mean something specific. In this case, increasing premiums creating a negative selection bias for the risk pool, which in turns increases premiums. As we've mentioned in a previous Volume, New York State's individual market went from 1.2 million policyholders to 32,000 policyholders due to some easily foreseen consequences of building a stool with only 2 legs. This is a death spiral.

 

It might be too much for certain House Speakers and Presidents - but there is actual math here. If there is a death spiral, then there would be a relationship between increases in premiums and decreases in policies sold. Some people smarter than me figured out what the relationship would need to look like to create a death spiral. Here is what a death spiral looks like, against what is actually happening:

 

 

Each point on this chart represents a state. The chart is comparing, on a by-state basis, the increase of premiums against the change in exchange plans sold. In case it isn't clear, it shows that states with larger premium increases are not seeing a larger drop in exchange policies purchase. This is by definition not a death spiral. There are problems with the health insurance system in the country, but they are not being caused by Obamacare.

 

Do the Speaker and President know that the Obamacare death spiral is a so-called alternative fact? In other words - are they woefully misinformed about the topic, or outright lying? Either way, it is scary that these people who don't know what is going on in the system think they have a way to fix it.

 

(1) Ryan and Trump were both quoting the CEO of Aetna. But he is not exactly a credible source. Aetna claimed to be scaling back due to losing money, but we found out from court documents that it was actually mostly due to trying to get their merger with Humana approved.

 

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