(Bloomberg View) — Two years in, there’s a lot we still don’t know about Obamacare. How many people will it end up insuring? What will the premiums look like? How much will the program cost?
Some of these questions won’t be answered satisfactorily for a while, if ever. Even the most basic data point, on how many people have gained coverage, comes from Gallup polls and is a little murky. The percentage of people saying they don’t have health insurance has fallen from about 17 as enrollment kicked off to about 12 now. The easing of the recession has presumably helped that.
Other answers, however, will come into focus in the next year or so. The most important being: What will the market for individual insurance look like once Obamacare is in full effect?
Policies for 2016 will be the first ones priced after insurers have a full year of claims data. The prices will increasingly also reflect the disappearance of a safety net: the reinsurance and risk corridor programs that were designed to protect insurers from unexpectedly high claims.
As written into the health reform law, these programs didn’t have to be budget neutral, meaning they could spend more on subsidies than they took in from insurer fees, hopefully preventing the dread problem known as the “death spiral.”
However, as Republicans complained that this amounted to a slush fund to pay off insurers for keeping premiums low (at taxpayer expense), the administration promised to make sure the risk corridors didn’t pay out more than they took in — and the “Cromnibus” budget resolution in December wrote that into law.
A new report from Standard & Poor’s shows just how much difference that could make: S&P expects there will be enough money to pay only 10 percent of claims. This suggests that at least a substantial minority of insurers are expecting to lose a lot of money on the policies they have already written. The typical response of insurers who lose money is to raise premiums in future years. There’s some evidence that this is already happening.