In short, the plan sponsored by Finance Committee Chairman Max Baucus would almost certainly lead to a death spiral in many private health insurance markets.
Insurance death spirals occur when regulators force insurers to offer coverage (“guaranteed issue”) at premiums below the known risk of those they are insuring, without any assurance that the shortfall can be made up elsewhere.
The Obama White House and congressional Democrats convinced themselves months ago that they could avoid the fate of these failed state reform efforts by forcing the young and healthy to buy insurance, whether they wanted it or not.
Robert Laszewski, a long-time observer of the health-insurance scene and no political partisan, wrote a devastating blog post on Monday documenting the folly of the Baucus plan. He cites several very real examples of low- and moderate-wage families that would clearly be better off financially if they paid the tax and waited to sign up for insurance until they were really sick.
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