Several years ago I had breakfast with Mitt Romney and he was talking about the state healthcare plan put in while he was governor. An analysis showed that a high percentage of young people don't sign up for health insurance through their employer, and he believed the Mass. Health Plan would work if they required young people to enroll, and young people would subsidize the cost for older people. He proclaimed the enrollment mandate was key.
Forward several years and Mitt losing the Presidential election, Obama claimed ACA was patterned after Mitt's plan. However, by then Mitt's plan had been in for several years and we already knew that Mass had about the highest healthcare cost per capita in the nation, so the enrollment mandate wasn't working.
Under ACA, a young adult to age 26 can remain under their parents plan, so those young people won't help keep the cost of ACA lower. Those not fortunate enough to have coverage under their parents plan have a choice between paying about $100 per month for very basic coverage, or $90 per year as a tax penalty. Simple economics and human behavior will explain the outcome: few will take coverage. Early indications are proving this expectation will become reality, and the cost for ObamaCare will quickly become the more expensive option for many people.
Insurance companies are smart, and they understand the dynamics of risk much better that the Federal Government. Over a decade ago, the Feds came up with what they thought was a good idea to contain Medicare expenses: pay insurers 95% of the expected cost in a geographic area and cuts costs by 5%. It might have sounded reasonable to a Washington paper pusher, but those of us who understand risk either laughed or took advantage. In fact, insurance companies instantly marketed new plans under this law, but their ads didn't feature old people in wheelchairs with free transportation to the doctor or hospital, they featured younger, healthier seniors and offered such things as free gym memberships. These plans didn't attract average or above average risk, they marketed to younger, healthier seniors and they made billions while the cost of care outside these plans skyrocketed!
With ACA offering guaranteed coverage, they will attract the bad risk like a supermodel visiting a boys summer camp. Insurance companies who did not join ACA as a provider will market to healthier people in need of coverage, and I predict this cycle will be a repeat of the original Medicare Risk plan experience. Katherine Sebelius is an amateur, and she is competing against people who actually understand risk and know how to do marketing. You might notice the largest insurers didn't join the ACA provider list, because they once again smell opportunity.
