Steve Davis, Managing Editor of Inside Health Insurance Exchanges, writes:

Once insurance exchanges are up and running, participating health insurers could experience substantial bumps in enrollment in their individual products. But the market that develops outside of the exchanges could be more vibrant and lucrative, particularly if coverage costs are lower due to adverse selection. And that has some state regulators and exchange boards petrified.

Under the reform law, insurers that participate in an exchange will be allowed to sell products outside of it as long as there is similar pricing for similar products. While the sale of insurance products inside and outside exchanges will vary from state to state, stakeholders are concerned that too many healthy people will seek coverage outside the exchanges, leaving behind a shallow and costly risk pool. …

The exchanges also will attract the previously uninsured and people who were covered through a state Pre-Existing Condition Insurance Plan (i.e., high-risk pool). That sort of risk pool will make adverse selection within the exchanges a significant threat.  …

The National Association of Insurance Commissioners (NAIC) recently issued a white paper that examined the potential for adverse selection as a result of exchanges. The report concluded that adverse selection was likely inside of the exchanges if health insurers are allowed to sell low-cost, “stripped down” products outside of them.

This could be another example of government controls begetting yet more controls.  The article continues:

Nearly half of 153 health plan executives whose companies are likely to participate in an exchange cite adverse selection as a top concern, according to results of a survey conducted by consulting firm PwC (previously PricewaterhouseCoopers).

Read the whole article: Inability to Disarm Exchange ‘Assassin’ May Leave Exchanges With Costly Enrollees with Chart: Adverse Selection Tops Insurers’ Exchange Concerns.