The cause of the most serious problems in Obamacare can be summarized in a single word: Dumping.
Group plans are dumping their sickest, most costly enrollees on the individual market. Within that market, health plans are dumping their most costly enrollees on each other. And individuals are dumping costs on other individuals by waiting to insure until they get sick.
In each case, the dumping is unfair and inefficient. Even worse, it creates perverse incentives that are causing prices to spiral upward and quality and access to care to spiral downward.
What can states do to solve these problems? They can make sure the victims of dumping are fully compensated for their losses. They can do that in one of three ways: (1) make the dumpers pay the full cost of their dumping or (2) make taxpayers pay for the full cost of dumping or (3) some combination of the two.
The problem is that states cannot do (1) or (3) without a change in federal law. And if they try to solve these problems with taxpayer money alone, they will create a taxpayer burden that will only grow through time.
Lets take a closer look.