August 1, 2018

Wednesday Off-Topic (Moderated) Open Thread (080118)

Filed under: Lucid Links — Tom @ 6:00 am

This open thread is meant for commenters to post on items either briefly noted below (if any) or otherwise not covered at this blog. Rules are here.

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  1. Stanford scholars examine causes and consequences of people dropping ACA plans
    June 6, 2018

    The health insurance marketplaces created by the Affordable Care Act (ACA) could unravel because its enrollees strategically drop in and out of coverage, Stanford scholars write in a new working paper released June 4 by the National Bureau of Economic Research.

    The end result could be a complete unraveling of the market, said Petra Persson, an assistant professor of economics in the Stanford School of Humanities and Sciences. [...]

    The researchers found that some people strategically drop coverage after they have used the health care services they need.

    “Our analysis shows that many consumers are strategically signing up for insurance to help defray the costs of non-chronic, potentially discretionary, health care needs and then dropping coverage once they have satisfied these needs,” said Diamond.

    “The regulatory structure of the ACA law potentially incentivizes exactly this behavior,” the researchers wrote, noting that because the ACA prevents insurers from discriminating against applicants, they cannot legally reject applicants who strategically dropped coverage the previous year. [...]

    Over 2014 and 2015 – the first two years of the program – the share of Americans covered by individually purchased health insurance rose by 50 and 75 percent, respectively.

    Health care consumption surged, especially in low-income households and families with young children. But, as the researchers discovered, so did attrition: Dropout was sharpest after just one month of coverage. And only half of all new enrollees committed a full year to an insurance program. [...]

    But for ACA to continue being effective, enrollees must stay enrolled, Persson added.

    While the ACA originally came with penalties for ceasing coverage early, the researchers said it was not enough. It was still cheaper for new enrollees to pay the fine for dropping out mid-year than paying a full year of annual premiums, the researchers found in their cost analysis.

    The recent removal of the individual mandate will likely increase the midyear dropout rate, said Diamond. “More dropout will raise financial pressure on insurers, increasing the possibility that the market unravels completely.”

    Interestingly enough, I found this article while reading another article on why personal bankruptcies were on the decline. That article attributed the decline to the ACA (with small attributions of an improving economy and changes to bankruptcy laws in 2005 that made it more difficult and costly to file). I was wondering if there may be other causes of the decline, that’s when I found the above article. Now I’m wondering how large a contributor the above might be to the reduction of bankruptcies.

    When people consume a year’s worth of health care in only a three-month period – and only pay a portion of the annual premium – it can be incredibly expensive for insurers.

    Comment by Par for the Course — August 1, 2018 @ 9:17 am

  2. Seems like a stretch to attribute a bankruptcies decline to ACA when the economy was improving, though not as much as during the past two years. But I haven’t looked at the stats in a long time, and probably should.

    Comment by Tom — August 1, 2018 @ 1:40 pm

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