The individual mandate, employer mandate and the Medicaid expansion are the cornerstones of the supposed expansion of health care coverage that will occur as a result of the reform law. Health insurance exchanges are critical to the performance of the individual mandate and are also used for Medicaid sign-ups. Therefore, it is worth understanding how traditional health insurance markets have worked in terms of eligibility and pricing and how the new insurance exchanges may be affected by changes in those eligibility and pricing rules. Recent research from the National Bureau of Economic Research attempts to do just that. (NBER Paper) The authors created a model of what would happen in the exchanges based on the pricing and eligibility conditions set by the ACA and on behavior exhibited by actual members in a large employer health plan. They simulated several other pricing and eligibility rules and other aspects that could affect what happens in the exchanges. The most notable conclusion is that the ACA pricing and eligibility rules will lead to extreme adverse selection, which essentially makes anything other than the Bronze plans, which have very poor coverage, unaffordable. Allowing varying levels of health status pricing reduces adverse selection and improves the overall level of coverage available, although it may cause overall welfare loss. The model indicates that absent subsidies or penalties, 26% of the population would opt out if health status pricing is not permitted, and those would be almost all the younger and healthier people, which means that policies will cost more for those who are in the exchange, creating a cycle with more dropouts, higher premiums, etc. Very high subsidies (or penalties), on the order of $3000 a year, are required to keep this from happening in the model. Experience thus far in the exchanges, although very limited, indicates that in fact only high risk individuals are signing up and most of those are going into Medicaid, which directly imposes a cost on the public, or are receiving large subsidies. Unless this changes, the public is going to face a much larger tax bill for Medicaid and subsidies than the advocates of reform projected, and many fewer people are going to end up with insurance than was projected and the cost for those individuals will be higher that was estimated. As the model used in this research paper suggests, all of this should have been anticipated and it should have been recognized that the law was not going to have the effects it was promoted to have.
Health Exchanges, Pricing and Adverse Selection
No Comments
✅ Subscribe via Email
About this Blog
The Healthy Skeptic is a website about the health care system, and is written by Kevin Roche, who has many years of experience working in the health industry. Mr. Roche is available to assist health care companies through consulting arrangements through Roche Consulting, LLC and may be reached at [email protected].
Healthy Skeptic Podcast
Research
MedPAC 2019 Report to Congress
June 18, 2019
Headlines
Tags
Access
ACO
Care Management
Chronic Disease
Comparative Effectiveness
Consumer Directed Health
Consumers
Devices
Disease Management
Drugs
EHRs
Elder Care
End-of-Life Care
FDA
Financings
Genomics
Government
Health Care Costs
Health Care Quality
Health Care Reform
Health Insurance
Health Insurance Exchange
HIT
HomeCare
Hospital
Hospital Readmissions
Legislation
M&A
Malpractice
Meaningful Use
Medicaid
Medical Care
Medicare
Medicare Advantage
Mobile
Pay For Performance
Pharmaceutical
Physicians
Providers
Regulation
Repealing Reform
Telehealth
Telemedicine
Wellness and Prevention
Workplace
Related Posts
Commentary
March 28, 2024
More Economic News
The Congressional Budget Office is expressing increasing alarm at the federal deficit and debt situation.
Commentary
March 27, 2024
Funniest Story of the Day
Would would have thought that hail could destroy a solar farm? Certainly not the nut-case…
Commentary
March 27, 2024
What Is Going on in the US Debt Markets?
The Treasury seems determined to rely on massive amounts of short-term debt to finance our…