5. Even more adverse selection: The catastrophic-insurance markets and the rest of the exchanges are separate risk pools. Within a given state, individual insurers don’t really have to worry about enrolling too many unhealthy or old people, because of something implemented by Obamacare called “risk adjustment.” Insurers with sicker groups get compensated, basically, by insurers that enrolled healthier groups. In all, the insurers want healthier and bigger pools, because they can take on more financial risk safely and make more money, but risk adjustment means it’s lot less useful for them to try to attract healthy enrollees.
The Obama administration is now going to alter the parameters for the catastrophic pool and the normal exchange pool in every state. If their claim that just half a million people who are getting hardship exemptions is accurate, this will also just be a marginal adjustment — but still one the insurance industry wasn’t expecting. All of those issues make it unsurprising to hear that, insurance consultant Bob Laszewski says, the insurance industry wasn’t consulted about these latest changes, and that its trade groups have criticized the maneuver.
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