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the country insurance company premium rate increase requests have with 25 percent young and healthy subscribers (with uncertainty
been in the double digits in many cases. That’s adverse risk selection about subsidies in the future), are experiencing millions of dollars
at work. The mix of subscribers is less healthy than planned, and in losses on their ACA plans. So, does it surprise anyone that some
costs are more than planned. of the companies are making the decision to drop out of the ACA
market? That’s adverse risk selection at work.
But didn’t the ACA provide for government subsidies to insurance
companies in the event of adverse risk selection? Well, yes and no. Dana A. Forgione, Ph.D., CPA, CMA, CFE is a Pro-
The House of Representatives holds the government purse strings fessor of Accounting in the College of Business at the Uni-
and never funded the subsidies. They were nonetheless paid last year versity of Texas at San Antonio. He is also an Adjunct
anyway, and now there’s a lawsuit at the federal level over whether Professor in the School of Medicine, Department of Car-
those payments were lawful or not. So that leaves the insurance com- diothoracic Surgery, the Department of Pediatrics, and in the School of
panies with uncertainty about whether they can count on such sub- Public Health, all at the University of Texas. He previously held a joint
sidies in the future. And of course some folks may question why the appointment in the School of Pharmacy at the University of Maryland,
taxpayers should have to subsidize big insurance companies any- where he taught in the Doctor of Pharmacy program. His research in-
way—can’t they just plan and set adequate premiums on their own? terests are in international comparisons of healthcare payment systems,
Yup, they can. And they’d need to be higher. costs and quality of care, as well as financial management for hospitals
and physician practices.
The bottom line? Insurance companies who set their premiums
based on an expectation of 40 percent young and healthy subscribers
(or a government subsidy in case there were fewer), and ended up
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