Obamacare Death Spiral Date: Sept/Oct 2014

Nearly 80 million Americans covered under company insurance plans will be up for renewal and potential cancellation this fall. There will be a tidal wave of cancellations. The system is already broken, as not nearly enough healthy young people have signed up. What is going to change between now and next fall? So lets see here, millions of cancellation notices will be sent out as the politician’s head down the stretch run for the 2014 election? What will be the prospects for any politician who voted for O’Care? Here Cato Institute’s Michael Tanner runs down the math of O’Care for Americans. You really can’t make up how crazy things are going to get.

With a new year and most of the website problems more or less fixed, ACA supporters are hoping the worst is behind them. They are in for a rude awakening.

By next fall, the “glitches” of 2013 will seem like the good old days. Here’s why.

More canceled policies: As of December 2013, roughly 5.4 million Americans with individual policies had their current plans canceled because they didn’t meet ACA requirements. Another 3 million to 8 million people are at risk of losing their policies in the coming months. However, this is only the tip of the iceberg.

Because the president delayed the employer mandate, the 55 percent of Americans who get their insurance through work haven’t felt the pain. They will soon. That’s because the same ACA provisions that caused the cancellation of individual policies will start to affect employer-sponsored plans by late 2014. In a nutshell, if a plan doesn’t meet “minimum coverage requirements” such as maternity care or alcohol counseling, it can no longer be offered. This could affect as many as 78 million workers.

That means that sometime around September or October, cancellation notices will be going out again. Most workers with canceled policies will end up with similar employment-based plans, but they could end up paying more for fewer choices. Others will be pushed into the exchanges, losing their employer-provided plans altogether.

The adverse selection death spiral: The ACA’s success hinges on enough young and healthy people entering the insurance pool at inflated prices to offset the costs of covering previously uninsured, high-risk individuals.

If, however, the insurance pool is composed largely of the old and sick who use more, and more expensive healthcare, insurance prices will necessarily rise to cover the cost.

This would lead to more young and healthy people dropping their insurance, which would then lead to pools even older and sicker than before. The cycle would go on and on in what actuaries refer to as the “adverse selection death spiral.”