I learned by reading this article what a “Death Spiral” is and didn’t realize that it was an “industry term”. I think there could be some other insurers that could be included in this practice maybe from what I read in the news with older policies being cancelled and new ones written. Some may accomplish this via marketing efforts and the old policy rates go out of reach as far as being able to afford so consumers are kind of forced to make a decision at that point. Those with pre-existing conditions sometimes can’t switch to a policy that is comparable or better and thus are trapped to take what they can afford and have to abandon their original policies as they can’t afford the premiums any longer.
Some consumers end up being uninsured the article states. The lawsuit was filed by the the Consumer Watchdog group in San Francisco. The lawsuit represents policies under both HMO and PPO types of plans. Last year a similar suit with Blue Cross was settled. BD
The lawsuit seeks to stop Blue Shield from shoving its policyholders into what is known as a "Death Spiral"–the industry term for what happens when a health insurer "closes" certain insurance policies to new customers, and later raises rates to those remaining in the closed policy until those enrollees can no longer afford coverage. Since consumers with preexisting conditions cannot switch to a comparable or better policy, consumers trapped in the closed policies must either accept greatly inferior coverage or face bigger and bigger premium increases.
"Blue Shield closed my family's policy and then threatened us with a 23% premium increase. We had no choice but to switch to the only bare bones policy Blue Shield offered us. When Blue Shield canceled the original rate increase, the company refused to let us transfer back into our old, higher benefit policy. Then, Blue Shield raised the rate of our bare bones policy by 14.8%!" said Robert Martin of Gilroy, California, one of the Blue Shield customers representing other consumers in the class-action lawsuit. "It's just plain unfair. Blue Shield is pushing families like mine with pre-existing health conditions out of their health plans – either into higher deductible coverage or into the ranks of the uninsured."
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