From the Desk of Alex Renfro
On January 24, the Department of Health and Human Services announced that they estimated three million individuals had enrolled in a private health insurance plan on the federal and state-based exchanges. This statistic reveals two aspects of PPACA that many will want to consider.
First, the more individual plans that are tied to exchanges, the more permanent PPACA is likely to become. While there is still considerable political attention around PPACA, the fact remains that three million individuals have found health insurance on this platform. Because repealing PPACA would disrupt coverage to these individuals, PPACA gains permanence as the enrollments continue to rise. While the numbers of enrolled are short of the governments estimations, given the website issues the numbers are not unexpected.
Additionally, participation of young and healthy individuals may be high enough to avoid adverse selection. Adverse selection occurs when too many unhealthy individuals comprise an insured group. The cost of health care for the group is likely to exceed the total premiums paid by the group. In such a case the insurance would fail; the insurance company would run out of money because costs would exceed total premiums. In order to compensate for the likely influx of unhealthy individuals, the exchanges will need to insure a sufficient number of young healthy individuals, or other groups with predictably low health care costs. The individual mandate will compensate for some of this risk management by taxing those without insurance, but sufficient participation by young healthy individuals in the exchanges would be a better hedge against adverse selection. The Department of Health and Human Services recently announced in a press release dated January 13, 2014, that 30% of those who selected an exchange plan as of December 28, 2013 were younger than 35. Given the fact that exchanges are still less that a year old, this is promising news.
As more and more Americans use the exchanges to procure health insurance, those exchanges will gain permanence and sustainability.