Evening Must-Read: Richard Mayhew: $2.32 Per Person Per Month: How Do We Get Death Spiral Stories Out of That? We Don’t

Richard Mayhew: $2.32 per person per month: “That is the great ‘risk corridor’ and ‘death spiral’ potential of one major Exchange carrier…

Highmark is an insurer for Pennsylvania, Delaware and West Virginia.  They did well on the Exchanges this year by picking up over 100,000 new members in Pennsylvania.  However their actuaries were off by a little bit….

The state’s largest health insurer expects to lose $2.9 million on its exchange business in Pennsylvania from July 1, 2014, to June 30, 2015, according to a filing with the state Department of Insurance.

The actuaries, flying blind, were able to get within a large cup of coffee.  The article states that the major source of error was an underestimation of how much ‘catch-up’ care that previously uninsured individuals were consuming in the first three months of the open enrollment and active policy period.  I think that this error will narrow as the last minute surge of healthier and younger people who either signed up last week or are in the process of signing up now through the blue box enrollment period enter the acturial calculations.  But even if the revised projection is perfect, and the age/health composition of the Highmark risk pool does not get younger/healthier, their base rates have to increase by the cost of a good cup of coffee.

So how do we get death spiral stories out of that? We don’t.