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On the Third Hand: Interstellar space

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If NASA ever sends remote-controlled probes toward Alpha Centauri, it should hire U.S. state health insurance rate-review actuaries to work the controls.

Just getting radio signals from Earth to a point half-way between the Sun and Alpha Centauri would take about two years.

Fortunately, the people who set and review U.S. individual major medical rate filings already have a lot of experience with critical communication delays of two years or more.

The Patient Protection and Affordable Care Act of 2010 (PPACA) has required insurers to set rates for 2014, 2015 and, now, 2016 with minimal information about how the new PPACA medical underwriting restrictions, premium subsidy program and marketing programs would affect the risk pool, and no information about how the PPACA “three R’s” risk-management programs will really work.

See also: Feds question insurers’ PPACA aid program filings

PPACA public exchange designers held a never-ending series of public hearings on what public exchange logos should look like, whether Summaries of Benefits and Coverage (SBCs) should be available in Navajo, and how many languages a state-based exchange ought to offer consumers who call its call centers.

See also: What If the Contractor Fails to Send SBCs?

But talking, in public, in detail, about how exactly the policies sold on and off the exchanges would work, and whether the insurers issuing the policies would remain solvent? Eh. Why would anyone bother with that? The grim truth is that even many readers of this site are more likely to click on 10 links to more information about what color socks will make your shoes look best than to read an article about the three R’s.

Of course, on the one hand, we usually muddle through. The sky usually hasn’t fallen before, and it probably won’t this time. The major medical insurers that really want to stay in the game will probably stay in the game, and profit margins will go through the usual ups and downs.

On the other hand, one reason insurers’, regulators’, and consumers’, lack of timely access to information about how PPACA World really works matters so much is that the health insurance rate-setting process is so rigid. Insurers generally have to set prices for the following calendar year (for example: in 2016) by May the previous year. In most states, regulators try to lock in the rates in the mid-summer.

See also: Regulators wrestle with PPACA 3R’s data lag

The only defense mechanisms insurers have to cope with the effects of setting out what turn out to be unrealistically low prices are to stop selling new coverage and to shut down.

In theory, the drafters of PPACA set up an “exchange,” or an auction system that helps buyers and sellers get the demand curve for coverage, to cross the supply curve.

In reality, the only time the PPACA World system actually lets insurers have any economic freedom is when the insurers are designing and pricing their coverage, about seven months before the calendar year and the plan year start. This structure seems especially prone to killing off the insurers in the early years that the PPACA system is in effect, before anyone knows how the system really works. But it seems likely to reduce system stability in future years, too.

The simplest solution might simply be to let health insurers adjust coverage prices every quarter, or every month, to reduce the brittleness of the current system.

On the third hand, consumers are broke and can’t easily handle big, frequent changes in premium prices.

To deal with that reality, some combination of the exchange, insurers, reinsurers and the government could step in and create a true health risk exchange system alongside the dog-and-pony show at the consumer-facing public exchange system.

In the real health risk exchange system, grownups with money could respond to changes in the health care system in real time, or near real-time, rather than pretending that having health insurers use detailed data from 2013, and a dash of 2014 data, to set 2016 premiums, in a rapidly, dramatically changing market, is a great way to proceed.


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