Adverse Selection Quotes

We know what a health insurance death spiral looks like because we've seen them before ... Washington state's experience in the 1990s is particularly instructive: After the state put in place guaranteed issue and community rating rules, carriers saw an influx of unusually sick and expensive beneficiaries, as well as individuals gaming the system by signing up for coverage in advance of an expensive medical event, then cancelling as soon as that event was over. Insurers simply couldn't make money in the individual market, and so between 1993 and 1998, 17 of the state's 19 plans stopped selling individual insurance plans. The next year, the final two carriers left the individual market. It was a total meltdown.

President Obama said, oh, we want to make insurance perfect for people, but he added all these regulatory mandates, made it too expensive. Young, healthy people didn't buy it, and the people remaining in the insurance pool were sicker and sicker. That's the adverse selection and the death spiral of Obamacare. And so really we do need to discuss the intricacies of what worked and what didn't work in Obamacare. And I think the better way to do this is to let individuals have the freedom to choose what kind of insurance is best for them. The government doesn't always know best.

It is the normal and everyday activity of insurance companies to identify and segregate that part of the population which has the highest risk and either refuse to insure them at all or charge them a higher premium.

Right now in the insurance markets, we have sort of a disaster unfolding, a downward spiral, adverse selection, premiums in the individual market going through the roof. People can't afford insurance and insurance companies are losing hundreds of millions of dollars. If you repeal part of Obamacare to get rid of the individual mandate but keep some of the ideas, that people can still buy insurance after they're sick, the situation gets extraordinarily worse. And so what we're seeing now could be tenfold greater if you only repeal part of Obamacare.

People won't buy insurance until they're sick. If you can call on your way to the hospital and get coverage, it's not really insurance at that point.

The fundamental problem of Obamacare is the insurance mandates. When you mandate what has to be insurance, it elevates the price. And when you tell people they can buy insurance after they're sick, they will. And you get what's called adverse selection.

In 1963 and later papers, I pointed out that the special market characteristics of medical care and medical insurance could be explained by reference to differences in information among the parties involved.

The money in the stabilization fund, $130 billion which I call an insurance bailout, is put in to try to cure the adverse selection that Obamacare created by making insurance too expensive. Healthy people didn't buy it. They tried to fix this by forcing young people to buy it through an individual mandate. Even that didn't work. So the way the Republicans fix it is they don't actually fix it. They subsidize it. So we have to fix what went wrong with Obamacare, not just recapitulate something that's broken.