Will Health Reform Bankrupt the Carriers?

The Affordable Care Act will put health insurers out of business if it’s fully implemented in two to five years, warns Jeff Kubik, founder and CEO of Employee Benefit Risk Management (EBRM). Having guaranteed issue without the ability to differentiate risk will bankrupt health insurance carriers. A great example is the death spirals always found in association groups or the disaster of multiple employer trusts, explains Kubik.

He illustrates the holes in a theory that most non-risk managers promote: putting together 10,000 lives has the same credibility of putting together a 10,000-life employee group. The actively at-work component is just one factor that requires different pricing for a true 10,000-life employee group. Putting together 100,000 sick lives does not make a credible 100,000 life healthy group, he says.

He says that, if ACA drives the private market out of business, a huge wave of shifted costs will swamp Medicare and Medicaid because the hidden tax subsidy from the private sector has to come from somewhere. Kubik predicts that demographics and technology will guarantee rising healthcare costs and that the public sector has no ability to control these inevitable cost increases. A good example is with the substantial rate increases scheduled to take place under Obamacare. Politicians won’t reduce benefits or increase revenues because it affects their ability to be elected. Traditional governmental methods of inflating their way out of debt won’t work, since health care costs historically rise faster than other costs, he explains. A better solution is to return all health care to the private sector, which is constrained by economics and cannot over promise without going out of business, he said. For more information call Falk Associates at 773-883.2580.

Last Updated 8/2/2017

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