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Risky business

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It is a common plot. While the adults are away on vacation, the teenage son who was left unattended throws a wild house party. All too predictably, thing gets completely out of control. Despite the rule that dad’s high-performance sports car was off limits, the son and a buddy take the car for a joyride that ends up with the car submerged in a lake. To raise the money to get the car repaired before dad gets home, the son turns his parent’s house into a brothel. It just goes from bad to worse.

You probably recognized the storyline as the plot of the 1983 movie “Risky Business.” If you cut the scene with Tom Cruise dancing around the living room in his underpants, socks and pink shirt, it is eerily similar to the plot that describes the initial rollout of PPACA and its “marketplaces.”

Insurers agreed to price plans without the usual rational pricing mechanisms in exchange for assurances that they would be able to offset the high-risk customers with a huge influx of newly insured, young, healthy members. If the sun, moon and stars all aligned perfectly, this Faustian bargain might have worked – at least in the short term. Unfortunately, as of this writing, the car is still in the lake … and the water is getting deeper and murkier.

A national poll conducted by Harvard’s Institute of Politics at the John F. Kennedy School of Government found that a majority of Millennials “disapprove” of the new health care law, regardless of whether it is referred to as “The Affordable Care Act” (56 percent disapprove) or as “Obamacare” (57 percent disapprove). Less than a third of currently uninsured 18- to 29-year-olds say they will “definitely or probably” enroll in insurance through an exchange if and when they are eligible.

According to the poll, most of those surveyed believe that ACA will raise costs and decrease the quality of care. The Harvard Institute’s poll is not an outlier. A recent ABC News/Washington Post nationwide poll yielded startlingly similar results. Weight the polls as you will, but remember that these institutions are not right-leaning, conservative players, so we can dispatch with the usual “bias” whining.

Lack of interest on the part of those who were to be the counterbalance to the older population (typically those with multiple chronic conditions and higher utilization) is a very troubling situation for the carriers. If you factor those polls into the ongoing debacle of and the frequent unilateral retrenchments and exemptions by the administration, it is fair to say that – at least from a carrier perspective – the (alleged) high-performance car has crashed into the lake.

ACA contains language about a risk adjustment mechanism (risk corridors) that was intended to alleviate this type of pressure. Whether they were deliberately understated or just did not take this type of dire situation into account, the corridors were not predicated upon helping the scenario we now have playing out.

Risk adjustment mechanisms are nothing new. Other countries that have a mandate for citizens to purchase – and carriers to cover – have long used such adjustments to keep all of the carriers in the game over the long haul. Carriers who attracted riskier populations receive financial relief.

Early reports in the press have been predictable. Continuing the “evil insurance company” narrative that helped get ACA passed, one recent headline trumpeted “Insurers Could Get Multi-Millions in Obamacare Bailout.” How, exactly, this qualifies as a “bailout” is difficult to discern, but it does make for a great headline.

Maybe we could use the comic relief of Mr. Cruise sliding across the living room singing “Old Time Rock ‘n Roll.” We are about to get the usual song and dance and it looks like the brothel part of the plot is about to play out. When that happens, Americans know who always pays – and who gets screwed.

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