NYT on the Results of a King Victory — they garble the RAND Study results
NYT on the premium price spike after a King victory:
“Death spiral” probably overstates the likely effect in some states. As my colleague Josh Barro has written, New York’s individual health insurance market did remain intact, in some ways — it was just absurdly expensive, and it shut out a lot of people. That was the experience in some other states, too. Kentucky, however, fared worse: More than 40 insurers left the market when the legislature passed its reforms. The law was rescinded.
History is a good reminder that results are unpredictable and variable. Some markets could collapse, while others might achieve some new, more expensive equilibrium. Anthony Lo Sasso, a professor at the University of Illinois, Chicago, who has studied the states that tried these policies, said the ones that fared best tended to be the ones that heavily regulated their insurers in other ways. He places few of the federal exchange states in that category.
Whatever happens is likely to happen very fast. In theory, the “death spiral” occurs slowly, over time, as customers become sicker and prices increase in response. But that’s probably not how things would happen in the Obamacare marketplaces.
Insurers can set their prices only once a year, and most customers have a small window each year to buy coverage. That means that insurers are likely to hike their prices substantially for 2016, anticipating their changing customer base. Depending on how worried they get, those high prices could become a self-fulfilling prophecy.
The RAND study says a King victory will cause unsubsidized premiums to increase 47%.
The average subsidy is 72% of the cost of the premium.
After real cost of the premiums is borne by those in the federal exchanges, then the price goes up 47% from there.
Today’s NYT simply reports premiums prices will increase 47%, which is misleading and an inaccurate reading of the RAND study. Here is what the NYT says today:
“The effect is likely to pull in these very sick people,” said Christine Eibner, a senior economist at the RAND Corporation, whose calculations estimate that prices could rise by an average of 47 percent.”
Here is what the RAND Study says: “Unsubsidized premiums in the ACA-compliant individual market would increase 47 percent in FFM states.”