As Republicans ready to dismantle ACA, insurers likely to bolt
By J. B. Silver
There’s a joke among insurers that there are two things that health insurance companies hate to do – take risks and pay claims. But, of course, these are the essence of their business!
Yet, if they do too much of either, they will go broke, and if they do too little, their customers will find a better policy. This balancing act isn’t too hard if they have a pool sufficient to average out the highs and lows. I speak with some experience as the former CEO of one of these firms.
Employer-sponsored insurance has fit this model fairly well, providing good stability and reasonable predictability. Unfortunately, the market for individuals has never worked well.
Generally, this model forces insurers to take fewer risks so that they can still make money. They do this by excluding preexisting conditions and paying fewer claims. In such a market, fewer people are helped, and when they are able to get insurance, they pay a lot more for it than if they were part of an employee-sponsored plan.
The Affordable Care Act changed all of this. Companies were required to stop doing these bad things. In exchange for taking on substantially more risk of less healthy patients, they were promised more business by getting access to more potential customers.
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