Why Republicans Should Be Embarrassed to Advocate Repealing the ACA
Aaron Carroll:
More mandate-relevant evidence | The Incidental Economist: Yesterday I described a new paper that provided evidence that the individual mandate in Massachusetts has done the job it was designed to do, namely to cause the individual insurance market risk pool to become more favorable (include more relatively healthy individuals than it otherwise would). >Today there is more evidence that a means of motivating healthy individuals to enroll (like a mandate) is a necessary part of insurance market reforms. Anthony Lo Sasso shows that community rating and guaranteed issue in the absence of a mandate (or some other incentive for the healthy to enroll) cause the risk pool to become more adverse (include more relatively sick individuals)....
Lo Sasso explains:
T[C]ommunity rating was associated with a worsening of the non-group risk pool as younger and healthier individuals left the individual market while older and sicker individuals joined or remained in themarket. To test the robustness of this conclusion, we used data from the National Health Interview Survey (NHIS) to compare changes in detailed measures of health status and utilization for people with non-group coverage in several community rating and non-community rating states. We found that those maintaining non-group coverage after the adoption of community rating were significantly more likely to have days when they were restricted to bed or when their activities were otherwise restricted because of health problems as well as more doctor visits and hospital stays. In other words, community rating in the non-group insurance market led to a pool of enrollees in poorer health. [...]
Our results provide a compelling portrait of the distortions that can result from community rating and guaranteed issue regulations in the non-group market when there are no provisions in place to keep people enrolled in coverage. The deterioration of the risk pool is consistent with predictions from economic theory and potentially lays the foundation for an adverse selection death spiral...
Aaron Carroll again:
Let’s be clear about what all this means. There are sound theoretical reasons and substantial empirical support for the idea that guaranteed issue and community rating without a mandate (or similar inducement) cause problematic levels of adverse selection. Adverse selection leads to higher premiums and can destabilize the insurance market. These are as close to facts as one gets in social science. Consequently, if one is in favor of a well-functioning insurance market in which everyone can obtain affordable insurance, one cannot advocate guaranteed issue and community rating and nothing else. One needs some way to keep adverse selection under control. To be blunt, one can’t just take the favorable parts of the ACA and reject the unfavorable part (the mandate), at least not with suggesting a replacement that will do the same job...
