After a month of the ObamaCare fiasco, insurers find themselves staring into the abyss of the “death spiral” — the risk-pool meltdown of accepting too many high-maintenance consumers without enough low-maintenance consumers to spread the costs. CBS Evening News focused on one such insurer, a new co-op in Maryland that got its start from a $65 million federal loan and planned on marketing mainly within the ObamaCare exchange. After a few days of watching HHS flounder, the CEO threw out that business plan entirely.
How many enrollees has he seen in a month? Maybe a dozen, and he needs 15,000 by the year’s end in order to break even:
The 23 small co-ops across the country that are part of the Affordable Care Act exchanges are intended to provide competition. As they adjust to stay afloat, some analysts worry that Obamacare, as designed, might not.
Their biggest fear is that with the website problems, more of the people who enroll will be the sickest and most motivated. If that happens, insurers would have no choice but to raise premiums and that could cause more healthy customers to flee.
In the insurance industry, that’s known as the “death spiral” — and experts say if that were to come to pass, the Obamacare business model would collapse.
Beilenson says he only knows for sure of a dozen people signing up for Evergreen so far.
“If we have 1,000 members at the end of the year, that will be a problem, but we thing we’re far along in our business planning and we expect to have about 15,000 or so, which would be our break-even (point),” he said.
The Obama administration tried to spark the creation of enough co-ops to give people a wider range of choices, especially in rural areas. So far that’s been a bust, as the New York Times reported last week and CBS confirmed on Monday. Fifty-eight percent of the counties serviced by the federal exchange only have one or two insurers offering plans, even with the hundreds of millions loaned out to these co-ops.
That, however, is a secondary consideration for Evergreen and its CEO. If he can’t sign up more than a dozen a month, or even a dozen a day, he’s going to be out of business — and he won’t be the only one looking at a death spiral, either. Small wonder they’re looking for corporate business, but that’s not a natural market for smaller co-ops, especially not those who picked the wrong business plan in the beginning.