Research unravels death spiral

January 22, 2014

It's still up to managed care to make the exchange products workable

The death spiral is unlikely, according to RAND research released January 21. Last minute market shifts to allow some Americans to keep their old health plans might be causing disruption in the risk pool in the exchanges, but it’s not severe enough to wind up a death spiral.

“Our analysis shows that plans to allow individuals to keep their old policies will not threaten the short-term viability of the new individual insurance marketplaces,” said Evan Saltzman,  the study's lead author and a project associate at RAND, in a statement. “However, the strategies put forward may increase federal spending and increase prices in the new individual marketplaces.”

The options that the Obama administration created to smooth over the promise that “if you like your health plan, you can keep it,” generally translate to health insurers  extending non-grandfathered plans. The bigger question is how long the plans will be extended and whether new members could sign up, thus bypassing the exchange markets.

Allowing members to keep their old health plans and allowing others to buy the policies is the most disruptive option, according to RAND. Diverting  young, healthy enrollees away from the exchanges could lead to enrollment drops and premium increases that would call for further federal subsidies.

Researchers estimate the option would likely raise premiums in the exchanges by as much as 10% and decrease enrollment by 3.2 million nationally.

"The enrollment numbers in the healthcare exchanges seem aligned with the Massachusetts experience at this point in their rollout,” says Don Hall, principal, DeltaSigma, LLC, and Managed Healthcare Executive editorial advisor. “Frankly, I don't think there is as much of an interest on consumer's part in keeping the old plans as is being portrayed by politically-leaning media. It is still incumbent on health plans participating in the exchanges to implement robust  marketing and sales initiatives that support their exchange products to make them successful.”