Wall Street Journal: The Young and the ObamaCare-less

As I get ready to prepare for yet another snowstorm, I leave you with another superb Review and Outlook, regarding the disaster that is ObamaCare, from the Wall Street Journal:

ObamaCare’s defenders say its troubles are over as more people sign up and, by the way, stop griping because the law is here to stay. Much evidence says otherwise, to the extent that the embroidered information the White House is willing to release counts as evidence.

Lifting the veil of secrecy last week, the feds revealed that 2.2 million people nationwide had selected a plan through December. That is a major improvement, especially for the 36 federally run exchanges, which gathered 1.19 million total enrollees. Traffic increased sevenfold over October and November.

The Health and Human Services Department still won’t say how many people have enrolled in a plan by paying the premium. But even assuming an implausible 100% success rate, the exchanges are still well behind the original target of seven million, much less the 20 million or so necessary to ensure a viable insurance market.

This is a failure by President Obama’s own standard. About one of six Americans under age 65 lack insurance in the official statistics. So where are they? Either Democrats exaggerated the problem to pass the new entitlement. Or else individuals don’t think ObamaCare plans offer value, and they’re choosing to stay uninsured or buy insurance off the exchanges where the regulations are slightly looser.

For the first time HHS also disclosed data about the demographic mix on the exchanges and the types of plans people are choosing. In rational insurance markets this wouldn’t matter because people would be charged premiums roughly proportional to their expected health risks. But ObamaCare’s regulations require younger and healthier people to be overcharged in the name of equity and income redistribution, and if they don’t report for duty then rates will surge over time.

Age is a crude actuarial proxy for health status, and merely 24% of enrollees are between ages 18 and 34. ObamaCare’s economics needs that to rise to about 40% to achieve a critical mass. Enrollment also skews heavily to people 55 to 64 years old, at 33%.

Insurance policies plunge into a “death spiral” when premiums don’t cover the cost of claims, causing rates to surge year over year and more and more beneficiaries to drop coverage. This “adverse selection” already appears to be underway in eight states including Maryland, Washington, Ohio, Texas and Indiana.

Humana disclosed in a Securities and Exchange Commission regulatory filing that the insurer expects its ObamaCare risk pool to be “more adverse than previously expected.” Expect managed-care organizations to start making write-downs on their ObamaCare business.

Yet liberals now claim that selection doesn’t matter because the law includes three temporary financial backstops that are meant to mitigate insurance losses. These so-called risk corridor, readjustment and reinsurance programs pay compensation if costs are higher than expected. The risk corridors punish insurers if they do too well in order to offset the losses of the poorer performers. Under the reinsurance program the feds pick up 80% of claims between $45,000 and $250,000, financed by a $20 billion tax on health plans.

The problem is that these backstops were intended to deal with relatively minor adverse selection problems. But if the problems affect too many health plans in too many states, these cross-subsidies may not be adequate. That possibility helps to explain why HHS is already unilaterally rewriting the rules.

The reinsurance was supposed to kick in at medical claims of $60,000, not $45,000, but HHS simply bumped the number down in a regulation last November. In a letter the same month HHS wrote that “we intend to explore ways to modify the risk corridor program final rules to provide additional assistance,” details to follow.

Marco Rubio and other Republicans are calling this a “taxpayer bailout” for the insurance industry, and they’re right to call out the lawless rewrite of the law. Repealing reinsurance, however, would punish some of their own constituents who would be forced to pay the even higher resulting prices. Taxpayers would also pay more because ObamaCare’s subsidies automatically rise with premiums. The “insurer bailout” is a good political line but the problem is the law itself.

Meanwhile, the insurers who conspired with Democrats to pass the law have figured out who’s their daddy. Jay Gellert, the CEO of the Medicaid contractor Health Net, complained the other day that this newspaper “has decided that they have a jihad on the Affordable Care Act.” That’s an unfortunate metaphor, but we’ll plead guilty to having predicted the problems that now beset the law. Mr. Gellert is a wholly owned HHS subsidiary who knows he’ll be punished if he doesn’t salute.

Here’s a question for Mr. Gellert: If everything is going so well, how come the White House is about to ride to the rescue of you and the other insurers that were supposedly the problem ObamaCare was designed to fix?

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