Adverse selection: The sick folks buy the insurance. Hmmm, no risk of that with an individual mandate. Cherry picking: The healthy ones buy your insurance policies. Hmmm, HIGH risk of that with the Yugo Tax!
It's bad enough that the Senate plan still treats health care and health insurance as an industry whose profit comes first. But the proposed tax on policies above $23,000 will almost certainly lead to heavy-duty cherry picking.
In European systems of private insurance, there's risk sharing. High-cost customers are subsidized; carriers of low-cost ones might pay in to a pool. So there's no incentive to cherry pick. But as an earlier post earlier post showed, even today's BCBS federal employee rates would put the US Senate way over the top, if it weren't being averaged down with other federal employees.
So what would an insurance company do to avoid the tax? The obvious answer is to cherry pick customers. But wait -- they're not supposed to be allowed to turn down customers, right? Well, maybe... but they can certainly try to market to cheap ones.
So what they could end up doing is youth marketing of medical insurance. "Young invincibles" haven't paid attention, but many actually have jobs with employers that have insurance plans. And some big employers give a choice of carrier. We already have consumer advertising for employer medical insurance. What would it look like with a $23,000 cap?
Hip-hop advertising? That marketeers' favorite Gen-Y attractant, "extreme"? Sure. Take a cheap plan. Highest deductible you can push. Market it as "X-Treme" or some such. Use the same ad agencies as Red Bull and Abercrombie. Advertise on The CW.
Let's face it -- insurance is boring. To people who have it taken care of for them, it's a Buick, a boring product that granddad might like. So a cherry picker would try to change that image. Sure, the plans would have to be cheap, but they like to sell cheap plans, if the coverage is even cheaper. And with that $23,000 bogey, the corporate average fuel economy of the insurance biz, the last thing you want to do is market to a bunch of old fogeys. Average age over 50 and it's TAX TIME. Average age under 35 and it's home free!
Fo shizzle! The new Aetna N-R-G plan! Comes with four free rap CDs a year! Bye bad old fartz, we yo' new health plan, and we are young! Or is it the Humana Heavy Metal Plan, where you kidz got the pOwer and get a free metal concert ticket every year?