Cat-and-mouse game

The world of health insurance is complex. Insurers can make more money when they attract a wide pool of subscribers, but can avoid paying expensive claims. Before the Affordable Care Act, insurers would commonly deny coverage to those who had medical conditions that might be expensive to treat (known as "pre-existing conditions"). With the passage of Affordable Care Act, insurers can no longer deny coverage to individuals. As might be expected, insurers have looked for other ways to maximize profitability. One method that makes sense is the use of narrow networks: in exchange for more affordable health care, subscribers agree to give up access to more costly providers (or at least pay for the care themselves when they visit). However, when nearly everyone selects such plans for their costs, then the more expensive plans that offer broader access are full of subscribers who benefit from the higher-cost providers, even after paying for higher premiums. The cost of those plans then skyrocket. As a result, we've seen many insurance companies stop offering PPO plans, which offer greater selection. To some, this has the effect of denying expensive coverage, somewhat akin to the older form of denying coverage to people with pre-existing conditions.

Health insurance companies are companies, and therefore shouldn't be reprimanded for trying to maximize profits as other companies do (such as pharmaceutical companies and for-profit hospitals). It obviously makes sense to have some regulation to help ensure that insurers are paying what they promise. At the same time, it's very easy to get that regulation wrong -- sufficiently motivated organizations can find the vulnerabilities of bad policy and exploit them for financial advantage.