Here’s a good explanation of the dynamics of the healthcare exchanges. A friend of mine’s son, who has a family of five, was notified by his insurer that his policy was going to be terminated and he needed to sign up for a new policy through the exchange. His existing policy was costing him about $12,000 a year – the best deal he could get through the exchange for similar coverage was $30,000 a year. Oops.
The biggest requirement is that they agree to insure at the same policy price any and all customers, regardless of their health (with only small formulaic adjustments for age and smoking). From a consumer point of view, that sounds great, and indeed it’s one of the most popular elements of the Affordable Care Act. But from the insurer’s perspective, it courts disaster. With too many sick or high-risk people in its pool an insurer can lose money. So the insurer’s smartest approach is to set premiums high enough to make a profit even if it winds up with a lot of sick beneficiaries.