ACA Price Spikes Due to Customers Who Incur Huge Bills and Cancel Coverage

August 15th, 2016

One of the themes I develop in Unraveled focuses on how the ACA’s elimination of limits on spending, combined with the never-ending series of special signup periods, have allowed people to utilize huge amounts of health care in a very short time, and cancel coverage when they’re done.

The New York Times today provides some examples:

Highmark defended its request by saying it was paying out more in claims than it was receiving in premiums. Jeff Scheib, the vice president in charge of actuarial services at Highmark, offered a statistic to illustrate the problem. Continue reading the main story “There were close to 250 individual A.C.A. policyholders in Pennsylvania who incurred over $100,000 each in claims and then canceled coverage before the end of the year,” Mr. Scheib testified. “This behavior drives up the cost to insure the entire pool, because people use insurance benefits and then discontinue paying for coverage once their individual health care needs have been temporarily met.” ….

At a hearing in Helena, Mont., Monica J. Lindeen, the state insurance commissioner, asked Blue Cross and Blue Shield why it was seeking an average rate increase of 62 percent for 2017, after receiving an increase of 22 percent this year.

“Cost is what’s really driving our rate increases,” said Michael E. Frank, the president of Blue Cross and Blue Shield of Montana.

“For every dollar we brought in last year, we paid out $1.26 for medical care,” Mr. Frank said. “In the first six months of this year, we have already paid $4.17 million in medical costs for the top 10 individuals. That’s $70,000 a month for those individuals.”

As we move towards the fall, when rates are finalized, I will be writing much more about this topic. The greatest threat to the ACA is no longer the Republican Party, or the Supreme Court, but the law itself. Now that it has survived the first two chapters in this trilogy, Obamacare will have to stand on its own feet.