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Making Sense of the Numbers

The early figures on the Affordable Care Act are raising some concerns for those who believed that it would address the problem of the uninsured. Christopher Weaver and Anna Wilde Matthews (Wall Street Journal) report:

Early signals suggest the majority of the 2.2 million people who sought to enroll in private insurance through new marketplaces through Dec. 28 were previously covered elsewhere, raising questions about how swiftly this part of the health overhaul will be able to make a significant dent in the number of uninsured.

A McKinsey & Co survey cited in the piece suggests that only 11 percent of those who purchased coverage under the Affordable Care Act between November and January were previously uninsured.  The numbers are somewhat better from other sources, but in each case a majority of those who purchased insurance were previously insured.

Granted, the first few months of the Affordable Care Act were particularly chaotic, and many of those who managed to navigate their way through the website suffered sticker shock (McKinsey found that affordability was cited by 52 percent of those who shopped for a plan but decided not to purchase one). But the numbers seem peculiar nonetheless. (more…)

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The debate over pre-PPACA (Obamacare) nongroup health insurance has heated up again recently, particularly on the issue of rescissions (cancellations of policies). John Goodman claims that before the PPACA, rescissions almost never happened except in cases of fraud.

Nevertheless, one problem with the nongroup market in many states was denial of applications for coverage from those who had prior health problems. Denial of coverage happened frequently even in states without onerous community rating provisions that gave health insurers a clear incentive to deny coverage to high risks. Why did health insurers choose to deny coverage altogether to these applicants rather than charge them a higher rate or offer more restricted coverage?

In some cases, government regulation was to blame. The “managed care” revolution of the 1990s introduced certain innovations designed to control health care costs, such as “elimination riders,” which would remove coverage from pre-existing conditions, and requirements to obtain referrals from primary-care physicians for access to specialist care. Managed care apparently worked to control health care costs, up to about 1-1.5% of U.S. GDP had it been allowed to take its long-run course. But it was unpopular, as constraints always are, and many states passed laws banning elimination riders and mandating direct specialist access.

Even without government regulation, however, social pressure caused the disappearance of some of these practices. On this point, there are two fascinating, complementary pieces of research: “The Death of Managed Care: A Regulatory Autopsy” by Mark Hall of Wake Forest University and “Risk Pooling and Regulation: Policy and Reality in Today’s Individual Health Insurance Market” by Mark Pauly of the Wharton School at the University of Pennsylvania and Bradley Herring of Emory University.

Hall investigates (more…)

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