Thursday, February 11, 2010

Individual Health Insurance Prices/Adverse Selection Spiral?

Many are reporting on Anthem of California's large price increases in the individual health insurance market -- see here for instance.

Be careful, of course, because all we really know is that
Anthem Blue Cross has unveiled rate increases of up to 39 percent for its 800,000 individual policyholders in California.

And of course there are the stories of individuals reporting their own personal increases.

What we don't know from the stories is what the average increase for the entire pool is.

However, some of the explanations are reasonable -- that some insured people are dropping out of the pool, leaving only the most costly remaining. As prices go up, this will of course only get worse: those who think they are healthy will take their chances, and drop out. This is the adverse selection death spiral.

I am, however, skeptical -- as usual. Skeptical that the anecdotes don't represent the average. And, if indeed the average is going up anything close to 39%, skeptical on why Anthem would be stimulating the debate on health care in such an aggravated fashion.

I will be keeping my eyes open for more information on this important development.

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