Wednesday, September 11, 2013

Economists Rail on Adverse Selection Nightmare Created in Exchanges

This is from Alison Bell at BenefitsPro:

Rules for the Patient Protection and Affordable Care Act could lead to severe adverse selection problems at the new public exchanges, three economists warn in new research.
Benjamin Handel, a researcher at the University of California at Berkeley, and two colleagues, concluded in a new working paper that efforts to keep insurers from using health status information in coverage pricing could lead to all consumers ending up in the skimpiest plans available.
The economists came up with those results after developing statistical models based on the assumptions that all people will have to buy coverage but insurers can come and go as they wish. 
But, if the PPACA risk-adjustment programs — such as a temporary reinsurance program —work perfectly, they could help reduce adverse selection and increase the percentage of people with rich coverage to 49 percent, the economists said.
The paper is available behind a paywall on the National Bureau of Economic Research website.
As the paper is "working," it has not yet gone through a complete academic review process.