Emily's Cat
Rarely prone to hissy-fits
Yes and no. From a perspective as one of the detractors within the industry, I'd say it's a mix of the first and second in your list. The advocates got unlucky about some things AND they were wrong about some things. I don't think that most of the advocates were lying - they weren't intentionally skewing the truth. It's an inherently complicated system - much more complicated than many people realize.The claims and projections were what they were, and the law was sold to the public according to those claims and projections. The reality is considerably worse than was claimed or "expected." There's really only three choices: the advocates got unlucky; or the advocates were flat out wrong and only the detractors were right; or the advocates were lying.
Personally, I'm partial to believing the third option. I think the insurers knew this was going to happen and expected to lose money, but didn't mind because the government was going to reimburse them for 95% of their losses by way of the risk corridors. Of course, they're screwed now, at least temporarily, thanks to Rubio's gutting of the risk corridors through some sneaky little legislating.
The actual results for 2014 came out better than the detractors expected. In many ways, they came out better than the advocates expected - prices were lower than they anticipated, actual claim costs weren't as high as projected, etc. The prices for 2014 were based on a LOT of guess work. A lot of complex modeling and decision analysis, a lot of game theory, a lot of straight-up dart-board methodology at play. Nobody knew how the system was actually going to work. And yes - absolutely - most carriers made bets on the risk corridors. They were willing to take the risk of having a lower-then-necessary price because they had downside protection. I've seen at least one company go out of business in some areas because they bet too much on that mechanism.
For 2015, a lot of the problems we are seeing are because of a massive information lag. The products for 2015 had to be filed by end of April 2014. Insurers had no experience. We were trying to project a full year's worth of costs in a new marketplace, based on 2 months of data (the pricing and analysis is done in early march in order to incorporate product design and corporate objectives into the filing cycle). And the experience we had for January and February of 2014 was atypical - but we didn't know that yet. A lot of it has been garbage in, garbage out.
The rate increases for 2016 are largely a result of so many carriers having missed the ball by such a wide margin in 2015.
I personally expect the market to stabilize in about the next three years. By that point, the risk corridors and reinsurance will be out of the picture, and we'll have a few years worth of solid, complete, analyzable data to work with. We'll be able to start overcoming the information lag and developing more credible projections. The premiums may still be higher than everyone wants them to be... but the year to year swings should reduce by a fair bit.
That's my prognostication. We'll see how wrong I am in about 2019 or so