Not from The Onion, Affordable Care Act Edition
By Garett Jones
In the 1990’s and 2000’s, as more violent criminals were thrown into prison and, partly for that reason, violent crime rates fell, the media had a wave of stories with titles like this: “Despite falling crime rate, prison populations rise.”
In 2010’s, we’ll see more stories with titles like the one below. The Times used a different title in the published article but used the title below in HTML and on social media links (h/t Matthew Bowdish):
The use of “despite” is sweet in its naivete, likely the product of a junior editor fresh from college.
Most of the article is about the battle between insurers asking for big rate hikes and regulators sometimes saying no. This game has always gone on but now it’s being played for bigger stakes. And this really is a game where lying is optimal: If an insurer knows its rate requests get turned down somewhat randomly, they will ask for bigger rate increases than they really want.
Remember: Car dealers don’t really want their sticker price to be the real price. Demand curves for a dealer probably slope down, so they intentionally list prices that are more than they typically want to sell it for.
The same idea applies to insurers: Don’t believe that these big rate requests are their real requests. They know what game they’re playing and they are serious about winning it. Deduce accordingly.