<p>My numbers are similar to Kaiser’s. I dont know what kaiser did, but I know what I did. I took the 1 million most profitable young healthy people. I assumed that every dollar paid in premiums went to the bottom line. Every dollar. And I dropped these most profitable young people from enrolling. That was pretty conservative.
If I used more of a mix that dropped, some sick and some healthy, I am pretty sure the premium shortage would be less.</p>
<p>However, I am interested in the answer to those questions. I think the guy went to Columbia. My son has a graduate degree from Columbia. I have to respect the guy. :)</p>
<p>It is interesting. I think the author is missing medicaid sign ups. I would assume the most costly people arent makimg much money. But … I would love The answer to my questions. I think the author’s points are interesting. </p>
<p>What if nobody who signs up is healthy? Nobody. We do have Wellpoint saying they are happy with their sign ups. </p>
<p>Did we talk about this before? Am I having a deja vu moment? Maybe I dreamt this. My dreams have not been that intersting lately. :)</p>
<p>It is entirely reasonable to assume the people signing up in this age group are probably unhealthier than those who are not signing up. The author says that Kaiser did not consider this important fact.</p>
<p>I read the entire ValuePenguin paper, and I didn’t learn one thing. Because the entire paper was obvious. Health care costs are concentrated in a small percentage of the population. If that small percentage of the population is overrepresented among enrollees, costs will be a lot higher.</p>
<p>Now, let’s apply Fang’s Razor. If it’s obvious to me, will it also be obvious to the people who are paid high salaries to set premiums? Why yes, it will. Because they’re not idiots.</p>
<p>Yes it is reasonable to assume the unhealthy are more likely to sign up. I dont know if that changes anything. Did the insurance companies get the wrong mix? Kaiser assumes the mix is correct and then drops the equivalent of 1 million healthy people from the rolls to get the premium hit. (That is how the numbers work out ). </p>
<p>In order for Kaiser to be wrong… The insurance companies have to have the wrong mix. Do the insurance companies have the wrong mix? </p>
<p>Where did this guy get the baseline? I could guess. :)</p>
<p>I don’t think Kaiser considered the mix of 18-34-year-olds, just the fact that they’re less than 40% of the sign ups. If this was obvious, you would not have assumed a 24% representation was not a problem. It seems to me if this group is way under-represented, it is likely the healthy people in this age group are the ones not signing up. I think this is a reasonable assumption, hence the likelihood of huge premium increases next year.</p>
<p>"What could be problematic is if the mix does not improve in the long run. With only a subset of the uninsured enrolled so far, there is an opportunity to get a better mix of low cost consumers into the pool. If in the later years however, the insurers are still finding themselves with an unbalanced base of policyholders premiums hikes would then have to kick in to make the exchanges work. This is where the oft spoken about death spiral could kick in as even more net payers end up getting pushed out of the market.</p>
<p>Note: As with all models, the numbers in our calculations are meant to be guidelines for understanding how things would change and are indicative of direction and certain degrees of magnitude. Actual numbers will differ as there are many factors a model cannot account for."</p>
<p>Can you show me a source for your assertion that Kaiser omitted healthy people when determining only a 2.5% premium increase was warranted for a 25% representation of the 18-34 age group.</p>
<p>The number of residencies available matches closely with the number of US medical graduates (I am guessing 90%). The rest are filled by foreign medical graduates, many of them American kids who studied abroad. However, there is a large contingent of foreign graduates who are applying to residencies who are turned down due to visa status in a large percentage of cases. </p>
<p>“Scenario 1: Young adults age 18-34 enroll at a 25% lower rate than other individuals relative to the potential market. Under this scenario, young adults would represent 33% of individual market enrollees instead of 40% as in the potential market. Taking into account the allowed three-to-one variation in premiums due to age, we find that costs (health care expenses plus overhead and profits) would be about 1.1% higher than premium revenues.”</p>
<p>“For each of the two scenarios, we projected what total costs would be for the assumed age distribution using an estimated variation of costs by age, and then compared that to what premium revenues would be using the standard age factors with three-to-one allowed variation in premiums. We assumed that administrative overhead and profits were a constant percentage of claims across age groups.”</p>
<p>How the heck does an insurer- or anyone- know, at this point, who’s “healthy” and who’s not? Wasn’t on my app. I get the projections for actuarial what-ifs.
The Razor is sharp.</p>
<p>(On that note, Texas, the med school here has been expanding the freshman class every year. Already going to outgrow new space. Two new PA programs are starting in the area.)</p>
<p>dstark, so I am right. Nowhere did they say they made any assumptions about the mix of healthy to unhealthy sign ups in this age group. I think it is reasonable to assume there will be an unhealthier mix of people the lower the percentage of 18-34-year-olds who sign up.</p>
<p>GP, yes it is. I agree. That is not what the model says. Look at it. The model assumes that the more people sign up… The worse things get…</p>
<p>What you are really hoping for is the mix the insurers came up with is wrong. The insurers didnt plan for the sick people that are going to sign up and overestimated how many healthy would sign up. Also…the riak corridors are insuffiecient.</p>
<p>GP, I understand what you are saying. The Kaiser study looked at the premiums that these young people would pay (or not pay, if they didn’t sign up) but didn’t look at what they would cost. If fewer young people than expected signed up, the insurers would have less revenue-- but under your hypothesis, the insurers would hardly have any less costs at all, because the sickest young people would still be enrolled.</p>
<p>And that’s a correct analysis, as far as it goes. But it doesn’t go far enough. Notice what you don’t know. You don’t know how many young people the insurers expected would sign up, and you don’t know how healthy the insurers expected those people to be. </p>
<p>It’s irrelevant to compare the young people who sign up to the general population of young people who could sign up. We apply Fang’s Razor, and we realize that the insurers already knew that unhealthy young people would be more likely to sign up than healthy young people. So the relevant comparison is between the group of people that the insurers thought would sign up, and the young people that actually did (or will) sign up.</p>
