Football Team at the Buffet: Why Obamacare Markets Are in Crisis

You may have noticed that Obamacare’s health insurance markets are in trouble.

Insurers have announced that they are sharply raising prices or pulling outentirely. Many consumers will have fewer choices of insurance plans, and many insurance plans will include fewer doctors and hospitals.

The turmoil can’t be explained by one factor alone. But many of the most important problems can be understood if you think of an Obamacare marketplace as a particular kind of restaurant: an all-you-can-eat buffet. It can be a solid business, but it’s hard to get the pricing right.

Consider how difficult it is to accurately estimate. You know how much it costs to make a portion of potato salad or beets or fried chicken. But how many portions will your customers eat? The appeal of your business — and the risk — is that all people pay the same price, whatever their appetite. That is fine if you charge $15 and feeding the average customer costs $10.

– The New York Times

Read the full article here.