Selectively streaking counties

I’ve been thinking more about the bare county problem and I am not as worried about a state being completely bare but I am very worried about particular counties being bare on a strategic basis.

Let’s imagine that there is a large insurer in a state that is currently mostly bare.  That insurer is currently out of the Exchange in most/all of the state.  That insurer previously had spent time on the individual market in most of the state.  It has covered a significant number of lives in the state through the combination of Exchange, Medicaid, CHIP and employer sponsored insurance.  The claims data is not exhaustive but it is big enough, recent enough and clean enough to have a decent signal in it.

There are a few people with persistent million dollar claim years and a population of people with a detectably higher  probability of catastrophic claim years in any state.  The insurer with deep data has a fairly decent idea of where these people live.  Given the risk adjustment system and the limited reinsurance for million dollar claims, the insurer who covers these individuals will not be adequately compensated by risk sharing mechanisms.  They will only be able to pay those claims through high premiums.

Some insurers that possess a significant information advantage may look at a bare state and tell the state regulators that they are willing to enter Rating Regions 1, 3, 4, and 5.  Rating Region 2 is a black hole of highly likely catastrophic claims and they won’t touch it.

That is the scenario that I think is fairly likely if and when we start seeing bare regions.

 

 

 






6 replies
  1. 1
    CaseyL says:

    There are a few people with persistent million dollar claim years and a population of people with a detestably higher probability of catastrophic claim years in any state.

    Er… I think you meant “detectably.”

    PS and OT: WaPo saying Trump has fired Tillerson. Hoo boy.

  2. 2
    d58826 says:

    totally OT but Der Fuhrer just fired his S of S and replaced him with Mike Pompeo.

  3. 3

    All of this is merely a single pinprick consequence of the fact that private insurance is 100% incentive-incompatible and can only deliver good outcomes insofar as it is effectively regulated.

  4. 4
    GregB says:

    Trump apparently doesn’t like anyone hurting Putin’s feelings.

  5. 5
    GregB says:

    What overt Nazi will be appointed head of CIA?

  6. 6
    Sam Dobermann says:

    We need fed gov to re insure people who top, say 1million in a year. that would take some of the risk. so there could cover more regions. There are a few other things — later

    OT :BREAKING NEWS: Monmouth Poll

    BREAKING NEWS: Monmouth Poll @ConorLambPA: 51%@Saccone4PA18: 45% pic.twitter.com/8wwPoMtUAE— Adam Parkhomenko (@AdamParkhomenko) March 12, 2018

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