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You are here: Home / Anderson On Health Insurance / How Molina is modeling a death spiral

How Molina is modeling a death spiral

by David Anderson|  March 8, 20179:40 am| 26 Comments

This post is in: Anderson On Health Insurance

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Molina Insurance, a fairly successful Exchange carrier that has usually been profitable on and off Exchange, issued a statement yesterday afternoon concerning the House Repeal bill. The statement is ugly and it illustrates a very important point of the Republican bill. It will create an on-Exchange death spiral in many counties.

Just out: As a practical matter, this renders the #ACA replacement D.O.A.https://t.co/YdE0H1fiOt pic.twitter.com/jjIujan2Cy

— Andy Slavitt (@ASlavitt) March 7, 2017

So what is the model that leads Molina to believe the Exchanges would see mass disenrollment and high price hikes under the Republican plan? It is a combination of the flat age based subsidies and the late enrollment penalty being a proportion of premiums. Some markets and counties would not be affected. Portions of Texas and Pennsylvania for instance would see 21 year olds be able to buy Bronze plans at zero cost. Those counties should have healthy risk pools. But risk pools are not county specific. They are state specific single pools. High cost counties will have a very different dynamic.

High cost counties with a flat age based credit will see young people face significant out of pocket monthly premium expenses if they maintain continual enrollment.

A 21 year old is highly unlikely to need much care over the course of a year so most healthy 21 year olds will leave the market. They pay no penalty at the time of their decision to leave the market. And they will make the same decision the following year assuming no new information about their health status arises. Now a 22 year old can jump into the market with a 30% penalty which they will only pay if they know that they are going to be expensive in the following year. The ACA Exchanges average about 34% enrollment under age 35. This system will dramatically reduce enrollment as a number and as a percentage of enrolled for Under 35. The composition of the young enrollment will also be significantly sicker in high premium counties.

On the other hand, moderately expensive but still profitable 60 year olds know that their uncertainty zone for future costs are higher. They could have a year that looks a lot like the current year or they could have a catastrophic year. The odds of a catastrophic year are much higher for a 60 year old than a 21 year old. Further more the penalty for being unenrolled and then enrolling in the future period is much larger. For somewhat expensive but profitable members, the 30% penalty is much more stringent than the current $650 or 2.5% of income penalty. At the same time, the really healthy members who have low utilization at age 60 will drop coverage as the relative costs of the 30% one time late enrollment penalty is less than the cost of premiums for the current year.

Very low cost enrollees will flee unless there is a minimal cost plan out there.  The risk pools will become very old and very sick very quickly.  That is how Molina is modeling their future.

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Previous Post: « Trumpcare / Republicare and the Olds
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Reader Interactions

26Comments

  1. 1.

    rikyrah

    March 8, 2017 at 9:49 am

    keep bringing it and exposing them, Mayhew

  2. 2.

    guachi

    March 8, 2017 at 9:57 am

    What does the posted tweet say?

    I can’t see tweets at work. :(

  3. 3.

    David Anderson

    March 8, 2017 at 10:02 am

    @guachi: Molina projects 75% enrollment loss and 30% premium increase due to house bill

  4. 4.

    Barbara

    March 8, 2017 at 10:10 am

    When your animating vision is to undo what someone else has done you don’t generally end up in a better place.

  5. 5.

    Fair Economist

    March 8, 2017 at 10:13 am

    really healthy members who have low utilization at age 60 will drop coverage as the relative costs of the 30% one time late enrollment penalty is less than the cost of premiums for the current year.

    This is key at almost all ages. Because the penalty is a one-shot event (and relatively low) if you’re not constantly using healthcare financially it makes sense to drop it and rejoin if something happens. Everybody healthy exits the pool.

  6. 6.

    amk

    March 8, 2017 at 10:20 am

    was he in the group photo op with the twitler?

  7. 7.

    ArchTeryx

    March 8, 2017 at 10:21 am

    I happen to agree with many of the responders to the tweet: The assumption that it is D.O.A. also assumes that the GOP gives a damn. Facts not in evidence.

    I maintain what I said right after Trump was elected: ZEGS would mount the heads of every poor person who died for lack of health care on his wall like trophies if he could. He’s SS. A True Believer who considers himself a hero if he commits mass murder to enrich billionaires. The Krazy Kaukus thinks exactly the same.

    The question remains whether every single Republican Senator – 2 also wants to hop aboard the trains to the death camps. That has, and continues to be, the thing that will either allow the bill to sail through or stop in the Senate. We know McConnell’s happy to shovel coal while ZEGS sits in the driver’s seat. What about the rest of them?

  8. 8.

    CaseyL

    March 8, 2017 at 10:26 am

    @ArchTeryx: I expect they’ll vote for it – after maybe making a few noises about how “unfortunate” it all is. The so-called moderates have that Hamlet dance down to a fine art: talk like semi-reasonable people and then vote with their Party.

  9. 9.

    Villago Delenda Est

    March 8, 2017 at 10:27 am

    Not only should this asinine proposal be DOA, those who proposed it should be made DOA.

  10. 10.

    guachi

    March 8, 2017 at 10:29 am

    If Molina is correct, I wouldn’t be surprised if insurers pulled out of markets immediately upon passage of a replacement. No use sticking around with all that uncertainty and a hostile administration.

  11. 11.

    La Caterina (Mrs. Johannes)

    March 8, 2017 at 10:31 am

    But don’t the 60 year olds lose coverage for their “pre-existing” conditions if they drop out for a year? Isn’t everything basically a pre-existing condition to the insurers? I am confused.

  12. 12.

    WereBear

    March 8, 2017 at 10:38 am

    Heck, the bill is designed to destroy “access” to healthcare. Working as designed, people.

    What these rich assholes don’t seem to get is that a fully covered populace is their own insurance for medical developments.

    Herd immunity covers them, too.

    Surgical advances need to be practiced on somebody.

    Doctors and nurses need training to treat people with the latest.

    Research and development creates new and better treatments.

    These stupid and evil people are not just destroying lives now. They are undercutting everyone’s medical utilization into the future, too.

  13. 13.

    sherparick

    March 8, 2017 at 10:43 am

    @ArchTeryx: The Republicans, as politicians, do give a damn about their reelection. The whole Health Care fiasco is one more reason that in their heart of hearts they wish Hillary had won like they expected. Then they could all vote straight repeal, yell “failed,” “job killing,” “Obamacare” at the next mid-terms, collect their Kochtopus campaign contributions, and know that there would be no accountability since Hillary would veto the bill and everything would continue on with no disruptions that could be pinned on them. Now not so much. If they vote for the bill, they will get primaried by the Koch brothers. If they vote against the bill for they might be primaried by a Trumptista candidate. If either TrumpandRyan Uncare plan passes, or if they cave to the Kochs and vote a straight repeal, then suddenly a lot “Republicans” and “Independents” will discovery they are part of the “moocher” class and will vote Democratic in the next election.

    But under the radar, on things that really matter to Republicans and the donor class, the Republicans continue to pound workers, particularly workers of color, and the environment. https://www.theguardian.com/business/2017/mar/06/labor-protection-laws-repeal-poultry-industry-workers

  14. 14.

    DHD

    March 8, 2017 at 10:58 am

    That top map looks very close to the places that were supposedly decisive in electing He-Who-Must-Not-Be-Named. Given that IGMFY is the fundamental law of American politics, I wonder how much this will actually hurt the Republicans. They’ll have a lot of “Real Americans” (read: white, healthy, around or above 400% of the poverty line) to trot out and say how things are so much better now that they get RyanCare for free.

  15. 15.

    gvg

    March 8, 2017 at 11:01 am

    I wonder if there is some way for the insurance and healthcare sector to illustrate a strike. healthcare can’t actually strike till they really are out of business because someone could lie but maybe on a designated day they could hand every patient a card that says if ACHA passes we won’t be here, you would have to go x # of miles away to y hospital/doctor/clinic….Insurance companies could send out mailers saying if it passes we will cancel your plan it will cost an estimated z. If a lot of the entities participated I think it would scare the bejeesus out of apathetic voters.

  16. 16.

    DBaker

    March 8, 2017 at 11:10 am

    From TPM – Mick Mulvaney said:

    “We’re looking at it in a different way, Mark [Halperin], because insurance is not really the end goal here, is it?” Mulvaney responded. “It’s one of the conservatives’ – one of the Republicans’ complaints about the Affordable Care Act from the very beginning: It was a great way to get insurance and a lousy way to actually be able to go to the doctor.”

    “So we’re choosing instead to look at what we think is more important to ordinary people: Can they afford to go to the doctor? And we are convinced it will be possible for more people to get better care at the doctor under this this plan than it was under Obamacare.”

    David – can you translate this? What do conservatives mean when they say “get better care at the doctor”? I hear this all the time, but I have no clue what they mean.

  17. 17.

    Buskertype

    March 8, 2017 at 11:17 am

    Can you explain why western PA has such good numbers, and just across the border WV is so bad? I’m sure it’s complex… but even general terms would really help me understand

  18. 18.

    David Anderson

    March 8, 2017 at 11:20 am

    @DBaker: I do not know what he means

  19. 19.

    David Anderson

    March 8, 2017 at 11:21 am

    @Buskertype: UPMC vs highmark

  20. 20.

    Buskertype

    March 8, 2017 at 11:29 am

    @David Anderson: as in, highmark is just a shitty company? Or is it the Pittsburgh market lifting up rural PA’s otherwise bad risk pool? Or are there regulatory factors?

  21. 21.

    David Anderson

    March 8, 2017 at 11:31 am

    @Buskertype: strategic decisions made by UPMC to break highmark much longer post to follow

  22. 22.

    Buskertype

    March 8, 2017 at 11:43 am

    @David Anderson: wow… thanks!

  23. 23.

    elm

    March 8, 2017 at 11:53 am

    @DBaker:

    And we are convinced it will be possible for more people to get better care at the doctor under this this plan than it was under Obamacare.”

    I believe I speak enough gibberish to translate this.

    Conservatives like Mulvaney believe that the FreeMarket is magic and the ACA is bad because it disrupts FreeMarket magic. FreeMarket magic mandates that people will get “better care” with more FreeMarket.

    I.e. people don’t shop around enough for doctors when they have that fancy insurance, and that makes FreeMarket Jesus sad.

  24. 24.

    ? Martin

    March 8, 2017 at 12:44 pm

    Another angle to it is that Molina was primarily focused on Medicaid/Medicare services prior to the ACA being passed. They pivoted from that position to the exchanges and expanded into a range of other service (acquiring Unisys Medicaid, which was controversial within the company.)

    It’s not just a potential exchange death spiral, but also the medicaid changes really impact them and they would be motivated to speak against the bill but probably realize that the exchange customers are a more powerful political voice than the Medicaid customers. They were never really aiming to compete at the top of the health insurance market but rather to be more of a low-margin/low-cost player in the relatively underserved Medicaid market, so the exchanges were something of a natural fit for them. They’ve tried to ride the shifting winds as best they can. I don’t really know the details of where they are now, or even an overly consistent narrative on them, just the odds and ends that come up in conversation.

    Disclosure: I personally know John Molina, the CFO.

  25. 25.

    dm

    March 8, 2017 at 7:35 pm

    I know, dead thread, but I’m hoping David notices this and tells us what he thinks of the Single-Payer for California bill.

    Maybe it’s a silly intuitive leap, but I’m wondering if the appearance of states as insurers might make “across state lines” suddenly a lot less attractive to the Republican chorus, that is, if Nevadans (or even Texans) could purchase Californiacare for their own use.

  26. 26.

    David Anderson

    March 8, 2017 at 9:08 pm

    @dm: let me look at this

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