![]() But analysts say that provision could prove meaningless if the government does not vigorously enforce the penalties, as insurance companies fear, or if too many people decide it is cheaper to pay the penalty and opt out. The new federal health care law tries to avoid the death spiral by requiring everyone to have insurance and penalizing those who do not, as well as offering subsidies to low-income customers. While premiums for large group plans have risen, their risk pools tend to be large enough to avoid out-of-control rate hikes. Rates did not rise as high in small group plans, for businesses with up to 50 workers, because the companies had an incentive to provide insurance to keep employees happy, and so were able to keep healthier people in the plans, said Peter Newell, an analyst for the United Hospital Fund, a New York-based health care research organization. Since 2001, the number of people who bought comprehensive individual policies through HMOs in New York has plummeted to about 31,000 from about 128,000, according to the State Insurance Department. ![]() ![]() “What you get left clinging to the life raft is the population that tends to have pretty high health needs.” Scherzer, a consumer lawyer and counsel to New Yorkers for Accessible Health Coverage, an advocacy group. “You have a mandate that’s accessible in theory, but not in practice, because it’s too expensive,” said Mark P. Without healthier people to spread the risk, their premiums skyrocketed, a phenomenon known in the trade as the “adverse selection death spiral.” The pool of insured people shrank to the point where many of them had high health care needs. The healthier customers soon discovered that the high premiums were not worth it and dropped out of the plans. Healthy people, in effect, began to subsidize people who needed more health care. New York also became one of the few states that require insurers within each region of the state to charge the same rates for the same benefits, regardless of whether people are old or young, male or female, smokers or nonsmokers, high risk or low risk.
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