As far as I know, the health insurance bill passed by the House eliminates the ACA's individual mandate in favor of a “continuous coverage” requirement where a person who has gone without health insurance for more than 63 days is charged an additional 30 percent fee on their premiums for the next year.
This provision does not encourage healthy people to get and maintain health insurance, but just the contrary: it creates the financial incentive for young healthy people to delay getting insurance as long as possible. If a person goes 3 years without insurance and then obtains insurance, he will have more money in his pocket than if he had paid premiums for those 3 years. If he goes 4 (or more) years without insurance, he's even better off. This way of gaming the system will undoubtedly be especially attractive to those who recognize that their deductibles and co-pays are or will be so high that they can't afford to use their insurance anyway.
In my 57 years, I have never had a day without coverage of health insurance, yet during my adult life I have met my (until recent years, $250) deductible 1 year, back in 1988 when I had a minor elective surgery that required a couple of days in the hospital (it's an out-patient procedure these days). During my childhood, the year I had my tonsils removed was apparently the only year my medical expenses exceeded the deductible on my parents' insurance. So I would be one of the people who would be financially better off not having insurance for at least 3 years under the AHCA. Presumably there are still a few people like me who do not spend hours upon hours every year at the doctor's office. There are surely lots of young and middle-aged adults who are not drawing a big salary but who can do enough math to recognize that they would be financially rewarded by waiting until they need health insurance.
In American Federation of Independent Businesses v. Sebelius, the Court succinctly explained the process of adverse selection (my bolding):
https://www.supremecourt.gov/opinions/11pdf/11-393c3a2.pdf
The AHCA does not provide that “powerful incentive” for people to obtain insurance--it provides a powerful financial incentive for healthy people to delay obtaining insurance.
So how long will the AHCA survive the consequences of adverse selection? Within one year, only the very rich will be able to afford health insurance. Then what?
This provision does not encourage healthy people to get and maintain health insurance, but just the contrary: it creates the financial incentive for young healthy people to delay getting insurance as long as possible. If a person goes 3 years without insurance and then obtains insurance, he will have more money in his pocket than if he had paid premiums for those 3 years. If he goes 4 (or more) years without insurance, he's even better off. This way of gaming the system will undoubtedly be especially attractive to those who recognize that their deductibles and co-pays are or will be so high that they can't afford to use their insurance anyway.
In my 57 years, I have never had a day without coverage of health insurance, yet during my adult life I have met my (until recent years, $250) deductible 1 year, back in 1988 when I had a minor elective surgery that required a couple of days in the hospital (it's an out-patient procedure these days). During my childhood, the year I had my tonsils removed was apparently the only year my medical expenses exceeded the deductible on my parents' insurance. So I would be one of the people who would be financially better off not having insurance for at least 3 years under the AHCA. Presumably there are still a few people like me who do not spend hours upon hours every year at the doctor's office. There are surely lots of young and middle-aged adults who are not drawing a big salary but who can do enough math to recognize that they would be financially rewarded by waiting until they need health insurance.
In American Federation of Independent Businesses v. Sebelius, the Court succinctly explained the process of adverse selection (my bolding):
To ensure that individuals with medical histories have access to affordable insurance, Congress devised a three-part solution. First, Congress imposed a “guaranteed issue” requirement, which bars insurers from denying coverage to any person on account of that person’s medical condition or history. See 42 U. S. C. §§300gg–1, 300gg–3, 300gg–4(a) (2006 ed., Supp. IV). Second, Congress required insurers to use “community rating” to price their insurance policies. See §300gg. Community rating, in effect, bars insurance companies from charging higher premiums to those with preexisting conditions.
But these two provisions, Congress comprehended, could not work effectively unless individuals were given a powerful incentive to obtain insurance. See Hearings before the House Ways and Means Committee, 111th Cong., 1st Sess., 10, 13 (2009) (statement of Uwe Reinhardt) (“[ I ]mposition of community-rated premiums and guaranteed issue on a market of competing private health insurers will inexorably drive that market into extinction, unless these two features are coupled with . . . a mandate on individual[ s ] to be insured.” (emphasis in original)).
In the 1990’s, several States -- including New York, New Jersey, Washington, Kentucky, Maine, New Hampshire, and Vermont -- enacted guaranteed-issue and community rating laws without requiring universal acquisition of insurance coverage. The results were disastrous. “All seven states suffered from skyrocketing insurance premium costs, reductions in individuals with coverage, and reductions in insurance products and providers.” Brief for American Association of People with Disabilities et al. as Amici Curiae in No. 11–398, p. 9 (hereinafter AAPD Brief). See also Brief for Governor of Washington Christine Gregoire as Amicus Curiae in No. 11–398, pp. 11–14 (describing the “death spiral” in the insurance market Washington experienced when the State passed a law requiring coverage for preexisting conditions).
Congress comprehended that guaranteed-issue and community-rating laws alone will not work. When insurance companies are required to insure the sick at affordable prices, individuals can wait until they become ill to buy insurance. Pretty soon, those in need of immediate medical care -- i.e., those who cost insurers the most -- become the insurance companies’ main customers. This “adverse selection” problem leaves insurers with two choices: They can either raise premiums dramatically to cover their ever-increasing costs or they can exit the market. In the seven States that tried guaranteed-issue and community rating requirements without a minimum coverage provision, that is precisely what insurance companies did. See, e.g., AAPD Brief 10 (“[In Maine,] [m]any insurance providers doubled their premiums in just three years or less.”); id., at 12 (“Like New York, Vermont saw substantial increases in premiums after its . . . insurance reform measures took effect in 1993.”); Hall, An Evaluation of New York’s Reform Law, 25 J. Health Pol. Pol’y & L. 71, 91–92 (2000) (Guaranteed-issue and community-rating laws resulted in a “dramatic exodus of indemnity insurers from New York’s individual [insurance] market.”); Brief for Barry Friedman et al. as Amici Curiae in No. 11–398, p. 17 (“In Kentucky, all but two insurers (one State-run) abandoned the State.”).
But these two provisions, Congress comprehended, could not work effectively unless individuals were given a powerful incentive to obtain insurance. See Hearings before the House Ways and Means Committee, 111th Cong., 1st Sess., 10, 13 (2009) (statement of Uwe Reinhardt) (“[ I ]mposition of community-rated premiums and guaranteed issue on a market of competing private health insurers will inexorably drive that market into extinction, unless these two features are coupled with . . . a mandate on individual[ s ] to be insured.” (emphasis in original)).
In the 1990’s, several States -- including New York, New Jersey, Washington, Kentucky, Maine, New Hampshire, and Vermont -- enacted guaranteed-issue and community rating laws without requiring universal acquisition of insurance coverage. The results were disastrous. “All seven states suffered from skyrocketing insurance premium costs, reductions in individuals with coverage, and reductions in insurance products and providers.” Brief for American Association of People with Disabilities et al. as Amici Curiae in No. 11–398, p. 9 (hereinafter AAPD Brief). See also Brief for Governor of Washington Christine Gregoire as Amicus Curiae in No. 11–398, pp. 11–14 (describing the “death spiral” in the insurance market Washington experienced when the State passed a law requiring coverage for preexisting conditions).
Congress comprehended that guaranteed-issue and community-rating laws alone will not work. When insurance companies are required to insure the sick at affordable prices, individuals can wait until they become ill to buy insurance. Pretty soon, those in need of immediate medical care -- i.e., those who cost insurers the most -- become the insurance companies’ main customers. This “adverse selection” problem leaves insurers with two choices: They can either raise premiums dramatically to cover their ever-increasing costs or they can exit the market. In the seven States that tried guaranteed-issue and community rating requirements without a minimum coverage provision, that is precisely what insurance companies did. See, e.g., AAPD Brief 10 (“[In Maine,] [m]any insurance providers doubled their premiums in just three years or less.”); id., at 12 (“Like New York, Vermont saw substantial increases in premiums after its . . . insurance reform measures took effect in 1993.”); Hall, An Evaluation of New York’s Reform Law, 25 J. Health Pol. Pol’y & L. 71, 91–92 (2000) (Guaranteed-issue and community-rating laws resulted in a “dramatic exodus of indemnity insurers from New York’s individual [insurance] market.”); Brief for Barry Friedman et al. as Amici Curiae in No. 11–398, p. 17 (“In Kentucky, all but two insurers (one State-run) abandoned the State.”).
https://www.supremecourt.gov/opinions/11pdf/11-393c3a2.pdf
The AHCA does not provide that “powerful incentive” for people to obtain insurance--it provides a powerful financial incentive for healthy people to delay obtaining insurance.
So how long will the AHCA survive the consequences of adverse selection? Within one year, only the very rich will be able to afford health insurance. Then what?
