Wonkblog‘s Primal Urge to Reassure Wins Out: In point 4 of his 11 point “Wonkblog” (Headline: “The death of Obamacare’s death spiral”) WaPo‘s Ezra Klein assures his readers
“The risk of a ‘death spiral‘ is over.”
That’s because–he argues–even if the exchanges miss their targets for enrolling young people, it doesn’t matter that much in terms of premium increases.
But then in point 7 of his 11 point blog Klein says:
“‘The health mix of ACA enrollment is much more important than the age mix,’ writes [Larry] Levitt. ‘So far, we’re using age as a stand-in for health. But if all the young people signing up are sick, then the models break down.’”
Right. So if the exchanges miss their health targets–as opposed to their age targets–the risk pool might be so bad insurers would have to raise rates, making it even more difficult to sign up healthy people (“the models break down”). That’s the death spiral. It’s not at all implausible that the sickest young people are signing up and sicker old people are signing up.
Since we don’t know the healthy vs. sick ratio** of those who’ve signed up for Obamacare, the “risk of a ‘death spiral’” is not over.
Point 7 vitiates point 4.
Wonking or cheerleading? You make the call!
P.S.: Kaiser Family Foundation’s Levitt tweets, in response to this point, that the “shock absorbers” built into Obamacare–“risk corridors,” etc.–mean that the “risk of a death spiral is overstated.” But those shock absorbers expire in three years, and (according to critic Robert Laszewski) insurers will start to raise rates in only two years if the risk pools are looking bad. So you can’t say the risk of a death spiral is “over.” Levitt responds that:
I assume that enrollment will ramp up over the next 3 years, like CBO. Pool with high take-up = a diverse pool.
Well, yes. But that’s assuming success (“enrollment will ramp up …”). If you assume success then the risk of a death spiral is over! If you assume success then the risk is over no matter how many or few healthy people Obamacare has signed up so far. But what if insurers raise their rates in 2016, because the pool is looking unhealthy, or because the so-called “individual mandate” becomes widely mocked and disobeyed? Then enrollment might not keep ‘ramping up.’ And the risk of a death spiral would be …
It’s almost as if Levitt and Klein are locked into a mutually reinforcing alliance to reassure the public of Obamacare’s solvency! Not that there’s anything wrong with it. But it’s not entirely convincing.
Update: Megan McArdle is also not convinced.