When adverse selection becomes a national event; how do we enforce mandatory coverage under the PPACA?

 

The Patient Protection and Affordable Care Act requires every American to carry health insurance. That is a good thing despite the objection of those who see an infringement on their constitutional rights.  While I am not in favor of the PPACA as written, I am still waiting for someone to come up with a viable alternative to assure universal coverage. However, saying everyone must carry health insurance and actually making that happen, especially when the affordability issue is not resolved, is questionable.

One of the problems facing the Massachusetts health care system is adverse selection. That is, individuals under a mandate to carry insurance wait until they need health care to enroll, receive the care and then drop the insurance. At least one insurer in the State has documented the practice.

In employer plans, new employees typically have a limited period to enroll or they are automatically enrolled, but may elect out of coverage. In addition, there is an annual period each year when individuals are able to enroll if they did not previously. Similarly, newly acquired dependents must enroll within a specified period, generally thirty days. Under Medicare, failure to enroll on a timely basis results in a permanent extra premium (and since you cannot get insurance in lieu of Medicare, there is no choice). These procedures help avoid the problems experienced in Massachusetts.

This begs the question if Massachusetts has mandatory coverage how does selective enrollment and adverse selection happen. However, as long as it does happen why aren’t there penalties on the individual who plays the system at the expense of others? This may be the typical Catch-22 because higher costs on the individual will lead to more people being unable to afford the coverage they are required to have.

Yet to be written regulations will determine how all this plays out on the federal level, but no matter what the rules are, enforcing them and avoiding the pitfalls of reform will be a challenge.  Human nature being what it is, those Americans who see little risk in going without coverage will be inclined to game the system especially when the alternative is a relatively modest penalty versus $7,000 to $8,000 a year in premium.

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