Well, of Course the Number of Uninsured Is Rising

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The Gallup polling company reported last week the adult uninsured rate for the fourth quarter of 2018 rose to 13.7 percent, the highest level since the first quarter of 2014. Gallup’s lowest level for the adult uninsured (i.e., excluding children) was 10.9 percent, in November 2016.
 
The media and the political left blame President Donald Trump. But the rise in the uninsured is a well-understood actuarial problem known as “adverse selection.” That’s where an insurance pool has a disproportionate number of sick people, which pushes premiums up. Young and healthy people feel like they are being overcharged and leave the pool.
 
Gallup sees that trend, asserting “uninsured rates increase most among women, young adults, the lower-income.”
 
The Affordable Care Act’s “guaranteed issue” provision—requiring insurers to accept any applicant regardless of a medical condition—virtually always leads to adverse selection, because people know they can drop coverage and return if they develop a medical condition.
 
As retired health actuary Mark Litow and I wrote for the Wall Street Journal in January 2013—a year before Obamacare went into effect:
 
“Guaranteed issue incentivizes people to forgo buying a policy until they get sick and need coverage. While ObamaCare imposes a financial penalty—or is it a tax?—to discourage people from gaming the system, it is too low to be a real disincentive. The result will be insurance pools that are smaller and sicker, and therefore more expensive.”
 
What you are seeing is the collapse of Obamacare. The only thing saving it from complete implosion is taxpayers subsidize the vast majority of people in the Obamacare exchanges. Rising premiums have a much smaller impact when taxpayers are picking up the bill.
 
However, it is unlikely we will return to the previous uninsured rate high of 18 percent, in large part because Obamacare’s Medicaid expansion is responsible for nearly all of the decrease in the uninsured.
 
Indeed, the individual market, where individuals buy their own coverage, has roughly the same number of people in it now as it had before Obamacare. Though it’s not the same people; the pool is sicker, which is why premiums are so much higher.
 
Did Trump’s efforts to reduce some subsidies and limit advertising and outreach have an impact on the number of uninsured? Perhaps, at the margin.
 
But the uninsured rate is rising because Obamacare was poorly designed by politicians who knew little about health care. And now they want you to trust them to get Medicare for All right.

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