matters worse, as this causes insurance premiums to rise, reflecting the
deteriorating quality of the risk pool, the higher cost will drive the next tier
of relatively good risks out of the risk pool. This step-wise degradation of
the pool makes it less and less viable.110 If the risk mix gets bad enough the
pool goes into what some term a “death spiral.”111 Insurers can protect
themselves from this situation if allowed to “underwrite” applicants112 – i.e.,
initially exclude those who are poor risks, limit their benefits, and/or charge
them higher premiums – or to drop people from coverage when they prove
themselves to need too much care. Historically, U.S. health insurers,
operating in a free-market regime, have been able to manage their risk
exposure this way, in some cases “cherry-picking” only the very best risks;
and they have done so, yielding an unfortunate segment of the population
who, prior to the ACA, either could not get coverage or had to pay
excessively high premiums.113 In the interest of achieving universal
coverage and assuring non-discrimination, the ACA guarantees insurability
by forbidding insurers to exclude those with pre-existing health conditions,
impose waiting periods before such conditions become covered, raise
premiums on those who turn out to be poor risks, and drop such insured
individuals from coverage.114 Given these “patient protections,” it is
essential that the entire population be covered all of the time. If they were
not, prospective insureds could stay out of the risk pool until they needed
care and then come forward and demand their guaranteed insurability. That
would be tantamount to requiring fire insurance companies to issue policies
to homeowners when they come running in shouting that their houses are
To assuage the opposition of health insurers to the above-mentioned
“patient protections” and to combat adverse selection, which would
otherwise expose insurers to its destructive effects, the ACA contains both
110. BERNADETTE FERNANDEZ & ANNIE L. MACH, CONG. RESEARCH SERV., R42663,
HEALTH INSURANCE EXCHANGES UNDER THE PATIEN T PROTECTION AND AFFORDABLE CARE
ACT (ACA) 24 (2013), available at https://www.fas.org/sgp/crs/misc/R42663.pdf.
111. Yuval Levin, An Insurance Death Spiral?, NAT’L REVIEW, THE CORNER (Oct. 25,
(explaining that a “death spiral” is a progressively deteriorating risk pool that has gotten so
bad that it’s no longer sustainable).
112. See Larry Levitt & Gary Claxton, Is a Death Spiral Inevitable if There is No
Mandate?, KAISER FAM. FOUND. (June 19, 2012), http://kff.org/health-reform/perspective/is-a-death-spiral-inevitable-if-there-is-no-mandate/.
113. Leigh Page, Why ‘Cherry-Picking’ Patients is Gaining Ground, MEDSCAPE (Dec.
19, 2013), http://www.medscape.com/viewarticle/818079.
114. 42 U.S. C. A. §§ 300gg-3–7 (West, WestlawNext current through P.L. 113-296
(excluding P.L. 113-235, 113-287, 113-291, and 113-295)) (2010).
115. See Levitt, supra note 112.