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When I first got into the insurance business, I heard about what they called the Death Spiral.  Basically, what it was, was the insurance company having a pool of people with insurance.  Some get sick the cost of that pool goes up.  It is based on the entire pool not just one person.  Then the healthy people don’t like the rate increase so they move to a different company, but the sick now had a pre-existing condition so they had to stay put.  Then eventually, the entire pool was sick people and the cost of claims got higher so the cost to insure it got higher, to the point where the person had to decide, keep the insurance and keep paying, or self insure myself.

Now personally, I always believed that the fix to this problem was to basically extend the HIPAA law to basically state if you had insurance you could move carriers with no pre-existing.  Allowing the carriers to fully underwrite anyone who did not have insurance.  Either way, my opinion is not relevant here.  Enter 2014.  We are into the new PPACA, or Affordable Care Act.  Now there is no pre-existing condition on the new plans, but that comes with a cost.  You see higher costs on these plans as kind of the healthy have to pay for the sick.

The Affordable Care Act had a grandfather clause in it that basically stated if you had insurance prior to March 23, 2010, you could keep that plan.  This was more cost effective for most people as they were underwritten so an overall healthier block of business for the insurance carrier.

Well it now appears that carriers want to get rid of that block of business.  They cannot legally cancel those plans as they are grandfathered by the new healthcare law.  But what they can do is raise the premium to everyone on that plan, in that particular pool.  I just had one of my clients call me who I have at with this insurance carrier since 2009.  Since it is “grandfathered” he did not need to enroll in a new plan.  So he stayed were he was during last years open enrollment.  Guess what?? His premium is jumping for him and his wife from $1300 per month to a whopping $1800 per month.  A Huge increase.  That is a death spiral to an extent.  Now he can move to a new ACA plan which for now will save him some premium dollars.  Though his current plan he has a medication which cost almost $5000 per month retail, he gets for $5, the new plan will cost him $150 which is still a pretty good value based on the cost of the medicine, but how long until we see the ACA death spiral?  It is not a matter of if, but more a matter of when.


Thanks for reading!