Affordable Care Act

For example, one criticism is that although the healthcare marketplace was supposed to give consumers choices of health plans from insurers that compete to keep premiums down, fewer insurers seem to be participating and premiums are increasing sharply. This is in part due to the fact that the marketplace attracted to few consumers with little or modest health needs and instead attracted a larger proportion of sicker ones, which resulted in healthcare costs outstripping premium revenue.  Therefore, an insurance company either opts to exit the market as they are not earning enough money to keep up with the costs or increase their premiums to try and close the revenue-cost gap.  The increase in premiums, however, can further discourage consumers, particularly healthier ones, from enrolling, which worsens the problem.

One solution to the above issue is to subsidize the insurance plans to minimize their risk of loss. This helps the market stabilize and allows plan enrollment to grow. This is also referred to as a risk corridor program.