Over the weekend, the trade group America’s Health Insurance Plans released a study saying Baucus’ plan would hammer the middle class with huge increases in premiums and taxes. The study has stirred things up because it makes a case resting on acknowledged facts. You might call them the iron laws of insurance.<\/p>\n
One of these is that the extension of coverage to a higher-risk group will raise costs for everyone, because the average level of risk in the entire pool of insureds goes up. Another is the law of large numbers: The more low-risk people you can get in your pool, the lower you can set your premiums. Another is adverse selection, the inevitable tendency of the highest-risk people wanting your insurance the most, and the lowest-risk wanting it the least.<\/p>\n
These laws are, in effect, walls that Congress and the Obama administration keep hitting in their efforts to make health coverage universal without breaking the bank. Their idea is to get as many people as possible \u201d\u201d especially the low-risk young and healthy \u201d\u201d into the insurance pool as premium payers. In this universal system, adverse selection is no longer a factor, and insurers can cover the high-risk folks along with everyone else.<\/p>\n
That’s the theory. But when it comes down to drafting laws, there’s always an insurmountable hurdle….<\/p>\n