As the Obama administration begins to implement the Affordable Care Act, President Obama’s signature health care law, it faces “a triple whammy that almost nobody is paying attention to,” Goodman told CNSNews.com.
The danger from this triple threat is that too many healthy people will exit or never sign up for the exchanges, leaving only people who are the most expensive to insure.
“A death spiral for an insurance pool is like a normal company going bankrupt. And the odds increase the longer the computer problem isn’t fixed. Only the very sick and very desperate are going to try to enroll 25 times. Healthy people are not going to do it,” said Goodman, an economist often referred to as the “father of health savings accounts.”
But as premiums rise due to the higher volume of sicker enrollees, healthy young people will be even more reluctant to sign up on the exchanges even though they face a financial penalty for not having health insurance.
“They may not even have to pay the fine,” Goodman told CNSNews.com. “The only way the IRS can collect the penalty is withholding a tax refund, and if you plan well, you won’t get a refund.” Since the IRS is forbidden from garnishing wages or attaching assets such as bank accounts, vehicles or real estate to collect the penalty, people can escape it simply by increasing their payroll withholding.
Even if logging onto Healthcare.gov to purchase health insurance becomes as easy and routine as booking a flight, three serious problems remain:
1. High-risk insurance pools will end in January.
The financial risk of insuring people with serious health problems, such as cancer or HIV, is spread by enrolling them in federal and state risk pools. But “the states and federal government are dumping their risk pool enrollees onto the exchanges,” Goodman told CNSNews.com.
“On January 1st, the pools end, and people will go into the Obamacare exchanges if they can,” Goodman said. That includes 107,000 people from the new federal risk pool alone.
However, the end result is that “healthy people leave the pool because they are being over-charged. Sick people remain because they are being under-charged,” Goodman pointed out in his blog.
2. Retiree health plans will be dumped onto the exchanges.
“A lot of cities that made promises they can’t keep will also dump their retiree health plans,” Goodman said, including 8,000 municipal retirees in Detroit, which is currently operating under a bankruptcy order.
Facing skyrocketing healthcare costs, many private companies also plan to stop offering health insurance to retirees, he added, citing a Towers Watson survey in which 54 percent of mid- and large-sized companies said they plan to discontinue health care benefits for pre- and post-65 retirees.
“People who are in their 60's are six times more expensive to insure than 20-year-olds, but the law limits insurance companies’ ability to charge higher premiums,” Goodman says. Dumping them onto the exchanges will save them money, but "raise premiums for everybody.”
3. Obamacare eliminates the problem of ‘job lock.’
Many workers with health problems are afraid to leave their current jobs because they would face huge premium increases or even be denied coverage if they left their employer-provided plans. But “Obamacare eliminates that problem,” Goodman, who is also a senior fellow at the Independent Institute, pointed out. “Lots of people will go onto the exchanges for just that reason.”
At some point, the Obamacare exchanges could reach a tipping point when the number of most-expensive-to-insure enrollees eclipses the number of relatively healthy premium payers.
“Insurance companies will take big losses,” Goodman predicted. “I’m sure they can leave the system, but they will lose a lot of money in the process. This could go on for quite a while, but it will be chaos as more companies start dropping out and telling the government, ‘Our losses are too great,’ even as co-pays, deductibles and premiums go higher than people are used to.”
"What will happen if the effects of the “triple whammy” send Obamacare into a death spiral?" CNSNews.com asked him.
“They will repeal the whole law,” Goodman replied.