By now, its an old story.
How the Death Spiral Works
In insurance lingo, a death spiral occurs when a health plan starts attracting sicker patients, which causes the price of premiums to go up, which causes more healthy people (who have other options) to leave the plan, which causes the remaining pool to be proportionately sicker, which causes the price of premiums to increase even more, eventually resulting in the company going bankrupt, in other words, dying.
Read this critique of public options by a noted health insurance expert that explains the why and how death spiral risk.
(Especially, public options are susceptible to these Death Spiral effects.. see the example below..)
New York HMO/POS death spiral
http://www.pnhp.org/...
Monthly family premium rates for Point of Service Plans (POS)
$4450 - Aetna Health. Inc.
$3776 - Atlantis Health Plan, Inc.
$4066 - Empire BlueCross BlueShield HMO
$6824 - GHI HMO Select, Inc.
$4187 - Health Insurance Plan of Greater New York, Inc.
$3816 - Health Net of New York, Inc.
$3500 - Managed Health, Inc.
$4208 - Oxford Health Plans (NY), Inc.
HMO family rates for these same insurers range from $2266 to $5686
http://www.ins.state.ny.us/...
How can a national public option avoid a 'death spiral' like New York's without subsidies?
Its simple, either
1.) give the plan the subsides it WILL need to operate heavily in the red, or
2.) replace it completely with a national single payer plan, that isn't an "option"
saving so much money on administrative costs that the breathing room created will allow to insure everybody for free. Like Canada and many other countries.
Otherwise the Death Spiral will claim the public option quickly. the right will say "we tried universal health care and it failed" and America will sink into despair as we become a nation of sick, poor people.
They know this!
References:
Uninsured in America
Life and Death in the Land of Opportunity
http://www.ucpress.edu/...
Death Spiral or Euthanasia? The Demise of Generous Group Health Insurance Coverage
http://rider.wharton.upenn.edu/...