Short answer: My best order-of-magnitude estimate is between $500 million and $1 billion for the coming year of which a third to a half could be attributed to the President’s decision to honor his promise to let Americans keep their existing health insurance.
Insurers are rightfully complaining that the move by the President to fulfill a promise he made to permit Americans with “substandard” but previously grandfathered policies to keep their health insurance is going to destabilize insurance markets. There were such complaints going in to a meeting on November 15 between President Obama and selected insurance leaders and there were somewhat muted complaints coming out of the meeting. Insurers are concerned because the people who are now being given access to another market in which insurance policies may be cheaper are likely to be precisely the healthy people that insurers who wrote policies in the Exchanges assumed would be in those Exchanges. Their concerns are important because unhappy and unprofitable insurers have a tendency either to stop writing insurance or to raise rates. That hurts policyholders and it also hurts politicians who assured the public that the rates would be affordable. (The insurers are also upset because it’s a little challenging to uncancel policies on short notice, but we’ll leave that grievance for others right now.)
The instrument by which some are proposing to pacify the insurance industry for the surprise deprivation of healthy insureds is the hitherto obscure “Risk Corridors” provision baked into the Affordable Care Act (section 1342, 42 U.S.C. § 18062, for those scoring at home). It provides that the government cover up to 80% of losses an insurer incurs on an Exchange. It was always assumed — foolishly in my opinion, but assumed nonetheless — that this backstop would be costless because the government would also effectively tax up to 80% of profits via the same provision. If the insurers systematically lose money, however, because many of the people they thought would improve the Exchange pools with their good health are being given an option to separate themselves out and keep their old often-less-expensive and often-less-generous insurance policies, the Risk Corridors provision could cost the government a fair amount of money.
So, the question is, how much money is Risk Corridors likely to cost? To use the language from my prior post, how much VOOM? If it’s a relatively small amount, that would suggest that the President (and others’) proposal to honor a campaign commitment to let people who liked their health plans keep them is a better idea than if it’s a relatively large amount of previously unbudgeted money. I thought we might try a back of the envelope computation to see what’s involved.
Time to trot out some calculus. The Risk Corridors provision basically creates a mathematical function between profitability (as defined in that provision) and the size of a positive or negative transfer payment from the government to insurers writing policies in the Exchange. So, if we knew the distribution of profitability of insurers under the Exchange we would calculate the mean payment (an “expectation” for those with some statistics background) the government would make (or receive). Of course, we don’t know that distribution yet, but we can make some guesses and get some order-of-magnitude estimates.
If one assumes that the distribution of the ratio between claims and premiums has a mean value of one (i.e. that insurers on average break even), the the expected payment of the government is zero. That’s the assumption on which the Congressional Budget Office worked when it asserted that Risk Corridors would cost nothing. But what if one assumes that the distribution of the ratio between claims and premiums has a mean value of 1.1, i.e. insurers on average lose 10%. We’ll also assume for the moment that the distribution of the ratio is “log normal” and that 95% of insurers have a claims/premiums ratio of between 0.922 and 1.22. If we do the math — here’s the link to the Mathematica notebook that stands behind these computations — it turns out that the average payment of the government is about 3% of the average premium (before subsidies). If the mean of the distribution were 0.5, i.e. insurers on average have claims 50% higher than profits, and we hold everything else the same, the average payment of the government is about 34% of the average premium (again, before subsidies). So if, just for the sake of discussion, one assumed there were 2 million people in the Exchanges and that the average gross premium was $3,500, the government would end up shelling out $210 million per year to provide insurers with some relief if they lose 10% on average and would end up shelling out $2.37 billion per year to provide insurers with similar relief if they lose 50% on average.
The graphic below shows the size of the government’s Risk Corridors obligation as a function of the mean of the claims/premiums ratio under the continued assumption that the distribution is log normal and that the spread of the distribution is similar to that described above. With a little wiggle when the mean of the claims/premium ratio is close to one, the relationship is pretty linear.
To get the total bill for the government, however, we not only have to calculate risk corridor payments in relation to a premium amount, we also have to make a guess about how many people will enroll in the Exchanges and what their premiums will be. It’s complicated because, precisely because of adverse selection, there’s likely an inverse relationship between the number of people that enroll and the mean of the claims/premiums ratio. But since all we are trying to do here is get some order of magnitude estimates — the discussion of this Act has been hurt all along by false claims of precision — we can try to make some reasonable guesses.
Suppose, for example, that the relationship between the mean of the claims/premium distribution and the number of people enrolling in the Exchanges looks something like this.
What we can now do is graph the government’s overall risk corridor payments as a function of enrollment. I’m going to assume that the average premium is $4,000 per enrollee. That’s roughly the average $328 per month that Kathleen Sebelius reported for a silver plan. If people flock to the gold and platinum plans, the average could be somewhat higher. This graph is essentially the headline of this blog entry.
So, what we we see is that if, for example, enrollment for this year were to be 1 million, the total risk corridor payments might be somewhat in excess of $1 billion. If enrollment were 2 million, risk corridor payments might be $500 million. One enrollment crosses 3 million, the government actually could gain money via the risk corridors program.
There are a lot of unknowns going in to the graphic above. I do not pretend that it is precise. I do not even contend that it is accurate. Nonetheless, I believe it is useful. I do believe it provides a plausible order-of-magnitude estimate of an unforseen cost of the Affordable Care Act. If you asked for my best guess, I would tell you the Risk Corridor payments will likely be between $500 million and $1 billion this coming year as I would guess enrollment in the Exchanges will come out between 1 and 2 million (assuming they ever fix healthcare.gov). This does not mean, by the way, that the cost of the President’s fix (or of the similar bills now in Congress) is the full amount of the Risk Corridor payments. Some of these risk corridor payments might have been made even without the Obamafix. That is so because enrollments in the Exchanges may always have been overestimated and may have been made considerably lower as a result of all the fallout from the debacle of the healthcare.gov website rollout.
In the end, then, I suspect that for the coming year the price tag for the President keeping his promise that “If you like your health plan, you can keep your health plan” is going to be somewhere in the $200 million to $400 million range for the coming year. That’s about a third of the overall stabilization bill. And we’ll never know for sure because we won’t know how many of those that in fact do keep their health plan would have enrolled on the Exchange. In one sense, the money cited above may be seen as a rather inexpensive price to pay to make good on an alluring promise. On the other hand, it may also be seen as yet another unforeseen or unadvertised cost of a bill to transform American healthcare. It’s easy to make feel-good campaign promises when you aren’t fully honest about the cost.
Surely all parents — or very young readers of this blog — will recall The Cat in the Hat Comes Back. It’s a marvelous tale of a feline visitor creating chaos as two young children are again questionably left alone by an apparently single parent. But the basic idea of the story is that the Cat in the Hat eats cake with pink icing in the bathtub, which results in a dreadful pink ring being left in the tub once the decision is made to empty the water. Upon the horrified pleas of the children that this tell tale sign of a poor decision on both their part — not acting more aggressively to prevent the cat from entering — and the cat’s — choosing a vulnerable household site in which to ingest potentially polluting pink icing — might anger their mother, the ever-confident Cat develops a series of fixes. They begin with the cat’s use of mother’s new dress to wipe off the ring. But, of course, this “fix” simply transfers the horror of the pink ring from the bathroom to the wardrobe.
Much of the remainder of the story is then spent detailing how each successive “fix” simply makes matters worse until there is complete (and delightful) chaos and the entire landscape is covered in the apparently undilutable horror of the original pink ring. The situation is salvaged only when the Cat pulls mysterious “VOOM” out of one of his nested hats and uses its power instantly to remove all traces of the pink icing and restore order to the snow-filled landscape in which the book is set.
As the most thoughtful parents and fiscally conservative children recognize, however, the apparent victory of the cat over chaos may be illusory, placating the mother for now in its restoration of a superficial benevolent equilibrium, but creating potentially grave systematic consequences later on. For no consideration has been given as to whether this use of apparently scarce VOOM — so small you can not see it — resulting from an obvious poor choice will deplete the VOOM supply and thereby prevent subsequent VOOM expenditures to deal with future problems. Might it not be better, the more clever readers recognize, for incentives to be established to deter future bathtub cake eating at all.
Does everyone then see it? The pink ring is the adverse selection problem created by assuming that private insurance could operate in a system without medical underwriting when only mild punitive measures would be taken for the failure to procure insurance and when many, however shortsightedly, would prefer to use their scarce resources other than for insurance that covers not only catastrophic medical expenses but also all sorts of medical services that they either might not need or might be able to acquire without resort to the complexities and expense of third party payment. The Cat is, of course, President Obama, trying assiduously and with false or foolish confidence to fix the situation. (Are the little sub-cats state insurance regulators only making matters worse?) The chaos is a metaphor for the problem that erupts when one attempts symptomatic cure of more fundamental and architectural design problems — frequently, these ill-thought-through attempts only make matters worse. (Pacifying the people whose insurance was cancelled but, to the extent such an effort actually succeeds, destabilizing the Exchange-based insurance pools that formed the core of the statutory reform.)
And VOOM, what is VOOM? VOOM is money. VOOM is “Risk Corridor” payments under section 1342 of the Act (42 U.S.C. 18062). Those payments are what it will take to “clean up the snow,” to restore any semblance of stability in the Exchange markets otherwise destabilized by removing a large segment of largely healthy individuals from their pools. But, again, I suspect, no consideration has been given as to the true bill for the underlying mistake, thinking that a system could be designed that, without requiring massive government subsidization, so defied economic laws which have, for a long time, told us that systems of private insurance in which underwriting is prohibited sooner or later — often sooner — contract due to adverse selection and, on occasion, fall into the black hole of a death spiral.
OK, OK. It’s a flawed analogy. I agree. And I do have some concerns that Dr. Seuss would not appreciate this political appropriation of one of his surely apolitical masterpieces. I ask for some indulgence and promise that far more scientific posts are forthcoming. But if Jonathan Gruber, one of the intellectual chiefs behind the Affordable Care Act, can write a politicized graphic novel extolling the virtues of the ACA, surely I may be indulged some literary criticism as a way of constructing an operating metaphor for the issues currently plaguing the same statute.
More people are starting to pay attention to the stealth “Risk Corridors” provision contained in section 1342 of the Affordable Care Act (18 U.S.C. § 18062) . They are looking at whether that provision of the law, which calls for transfers by the Secretary of HHS from profitable exchange insurers to unprofitable ones, might persuade insurers to retain greater enthusiasm about participation in the Exchanges and whether the financial bill for section 1342 might not be the zero projected by the Congressional Budget Office. One of those paying attention is the influential CNN.
In a story this evening titled “Obamacare fix could add millions of collars in government costs” by Adam Aigner-Treworgy, CNN pretty much tracks the analysis offered on this blog in previous days. It quotes the Kaiser Family Foundation, usually a pretty reliable source on the finances of the ACA as saying that the difference between the amount previously thought owed under Risk Corridors and the amount that might be owed as a result of recent developments “could be tens of millions or even hundreds of millions of dollars.” The story likewise quotes Melinda Buntin, a former deputy director for health at the Congressional Budget Office and current chair of the Department of Health Policy at Vanderbilt University:
To the extent that the risk pool changes in ways that were not foreseen by the insurers because of the announcement yesterday and they are not included in the bids that they proposed to the government and that their selection is riskier and more adverse that they anticipated then that could be an additional cost to the government.
Risk corridors was also the topic of remarks today by White House press secretary Jay Carney. As reported on the blog, The Hill, Carney said the following today. “If the costs are higher, then [the Department of Health and Human Services] can mitigate those costs with insurers,” Carney said at a briefing. “If costs come in significantly lower, then the insurers will replenish the fund by passing back some of those profits.”
The question again is where does the money come from? Just saying “the treasury,” as law professor and ACA zealot Timothy Jost is quoted as saying in the CNN report, is not precise enough. Someone needs to find a specific appropriation that can be used for this purpose. On the other hand, if the Kaiser Foundation is right and we are talking about sums less than a billion dollars, that may be a very small amount for President Obama to dig up from somewhere in order to salvage his signature domestic achievement. I guess I’m a little less confident that the bill is going to be that small — unless, of course, enrollment in the Exchanges continues to be minuscule.
I’m hearing a lot of the lazy “but what are the political implication” perpetual horse race questions from the media about recent developments surrounding the Affordable Care Act. That’s fun Inside-the-Beltway stuff, but in the mean time there are real people who are likely to be helped and hurt with matters as essential as their health. So, what I am not hearing enough of yet, however, are tough, substantive questions that get to the heart of whether the Affordable Care Act is going to be stillborn. Here are some questions that I think intelligent journalists and blogger ought to be asking in light of recent developments with the Affordable Care Act. Getting answers in many cases may take persistent questioning and closer scrutiny of existing documents. In others, FOIA requests may be needed.
1. Actual v. Anticipated Age Distributions in the Exchanges
What is the age distribution by state and in the aggregate of persons who it is claimed have enrolled in Exchange-based plans under the Affordable Care Act? Once we have this data, we can compare it to (a) census data on the age distributions in the various states and (b) any prior estimates on what the age distribution of Exchange enrollees would be such as those described in this government document. If there is a significant difference between the age distribution encountered thus far and the anticipated age distribution, that increases the probability of the ACA succumbing to an adverse selection death spiral. This is so because, although the ACA permits some age rating, it damps the actual variation in expected claims from lowest to highest eligible ages down to a 3:1 ratio.
2. Actual v. Anticipated Metal Tier Distributions
What is the distribution of enrollees amongst the various “metal tiers” ranging from bronze through platinum? If the enrollees are flocking disproportionately to the platinum and gold plans, that suggests the people who are enrolling may be disproportionately unhealthy. While those plans were expected to draw a slightly less healthy population, the government planned on there still being a significant number of healthy people in those pools. According to data contained inside the government’s “Actuarial Value Calculator,” the predicted mean claim for bronze policies (across ages, genders, regions, etc.) was $4,977 per person whereas the predicted mean claim for platinum policies (again across ages, genders, regions, etc.) was $5,804. (Cells C88 in various tabs) I believe that significant selection of these more generous plans should give insurers (and insureds) concern about a death spiral materializing.
3. Where is additional “Risk Corridor” money coming from?
3. What the heck does this sentence mean in the letter from Gary Cohen, Director of the Center for Consumer Information and Insurance Oversight (pronounced suh-sy-o) to state insurance commissioners providing details on President Obama’s announcement that he would not be enforcing the Essential Health Benefit restrictions on certain non-grandfathered plans?
Though this transitional policy was not anticipated by health insurance issuers when setting rates for 2014, the risk corridor program should help ameliorate unanticipated changes in premium revenue. We intend to explore ways to modify the risk corridor program final rules to provide additional assistance.
To me, this sounds like the President is saying they will buy off the insurance companies in the Exchanges, who stand to lose as a result of the decision to starve them of mostly healthy insureds forced out of “substandard” nongroup policies. The President may be hinting that he will try to make them whole through providing more money under the Risk Corridors provisions of section 1342 of the Affordable Care Act, 42 U.S.C. § 18062. As discussed in a prior blog post, this may in fact be possible, but it is not clear where the money is coming from. I suspect this issue may form a significant part of the conversations between insurance CEOs and President Obama that will apparently occur at the White House later today. If so, journalists need to push on where President Obama is finding the money and how much money are we talking about?
Journalists might also note in pursuing this matter that it has hitherto been assumed by the Congressional Budget Office that the Risk Corridors program would be a net zero. Here’s what they said in their Regulatory Impact Analysis of March 2012:
CBO did not score the impact of risk corridors and assumed collections would equal payments to plans and would therefore be budget neutral.
If, as I have argued, the assumption in the CBO document has always been doubtful and is now almost certainly false, again, where is the money coming from and could we be talking about tens of billions of dollars? Is President Obama going to (a) keep his promise and (b) pacify the insurers by just spending lots of money that was previously unbudgeted and undisclosed?
A shout out, by the way, to blogger Kathleen Pender for being one of the few to focus on this issue.
4. Are any insurers yet threatening to pull out?
Have any state insurance commissioners heard rumblings or worse about various insurers pulling out for 2014 or declining to take on any more enrollees, if that restriction is permitted? I suggested in a Houston Chronicle op-ed yesterday that such a development was likely, but I don’t know of evidence that it has yet occurred. I could imagine, for example, insurers who priced their policies high relative to others of the same metal tier in the same market wanting to exit. They would want to do so because very few people are likely to select their plan and so there may be a lot of administrative costs for very little benefits and because the people who did select their plan may have done so because they believed the networks and coverages were more generous — something the less healthy would particularly care about. I could also imagine insurers who priced their policies low relative to others of the same metal tier in the same market wanting to exit. If, as is feared, the pool of exchange insureds is older and sicker than projected, the victims are likely to be the insurers who price low and thus have the highest amount of business in the Exchanges.
5. How serious are the insurance industry groups and actuarial warnings?
Journalists should be pressing people like Karen Ignani, president and chief executive of America’s Health Insurance Plans, Corri Uccello, senior health fellow at the American Academy of Actuaries, Jim Donelon, President of the extremely powerful National Association of Insurance Commissioners, and others on how great they regard the threat of the Exchanges becoming destabilized as a result of the combination of minuscule current enrollments coupled with the competitive alternative that appears to have been created by President Obama’s announcement yesterday or by the Upton and Landrieu bills circulating in Congress that do roughly the same or more to starve the Exchanges of healthy insureds. These individuals are issuing some fairly significant warnings about what is going on. Jim Donelon, for example, states:
This decision continues different rules for different policies and threatens to undermine the new market, and may lead to higher premiums and market disruptions in 2014 and beyond.
The American Academy of Actuaries, via David A. Shea, Jr., Vice President, Health Practice Council, warns:
Premiums in the new 2014 insurance markets would have been higher if the ACA rules regarding cancelled policies had been relaxed.
Approved premiums for 2014 are based on assumptions regarding plan cancellation requirements under ACA rules. The premiums approved for 2014 may not adequately cover the cost of providing benefits for an enrollee population with higher claims than anticipated in the premium calculations.
Costs to the federal government could increase as higher-than-expected average medical claims are more likely to trigger risk corridor payments.
Relaxing the plan cancellation requirements could increase premiums for 2015. Insurers cannot increase premiums in future years to make up for prior losses. However, assumptions regarding the composition of the risk pool would reflect plan experience in 2014.
This sounds very serious. Journalists ought to try to develop some statements from these people on the “order of magnitude” of the threats they see occurring as a result of recent developments.
Let us suppose, for the moment, that enrollment in the Exchanges increases as healthcare.gov becomes less dysfunctional and as we get closer to the January 1, 2014 and March 1, 2014 deadlines. It is, after all, unrealistic to think that enrollment will remain at the pathetic/paltry/miserable levels recounted by today’s testimony from Kathleen Sebelius, notwithstanding her counting of people who merely put a plan in their shopping cart. But it does seem likely to many , including me, that
the small and difficult-to-enforce penalties for 2014,
President Obama’s decision to let insurers “uncancel” ungrandfatherable policies and let some of those insureds stay out the Exchanges,
will likewise lead the enrollment in the Exchanges to be considerably smaller than projected. This is particularly likely to remain true, I believe, in states such as Texas in which institutional forces and political culture often do not encourage participation and in which fewer than 3,000 out the estimated 3,000,000 eligible to do so have enrolled thus far.
The key question is how resilient are the Exchanges to low enrollments in which, one would expect, the enrollees are — even more than they were projected to be — disproportionately older and disproportionately less healthy. And have the Exchanges been rendered yet more fragile by what many cheered as the surprisingly low premiums charged by many insurers? Could those insurers, who are likely to swoop up most of the business in a price sensitive market, in fact be about to face the winners curse? The answer to these questions may lie deep in the details of one of the least studied and yet one of the most important set of provisions in the Affordable Care Act: the reinsurance and risk adjustment provisions contained in sections 1341-1343 of that Act and now codified at 42 U.S.C. §§ 18061-18063.
Here’s the (long) paragraph-length explanation of how these reinsurance and risk adjustment provisions work. 42 U.S.C. § 18061 basically creates a transitional (2014-16) government operated stop-loss reinsurance program funded out of a special tax on other health plans ($63 per covered life). The reinsurance attaches when a person covered by a plan in an Exchange incurs $60,000 or more in claims per year. After that point, the reinsurer pays for 80% of the claims up to a cap of $250,000. Thus, if an individual had claims of $180,000 in a year, the government would reimburse the insurer for $96,000, which is 80% of the difference between $180,000 and $60,000. What this provision appears to do is make insurer profit and loss less sensitive to attracting high claims insureds. 42 U.S.C. § 18062 basically redistributes money in a complex way from insurers whose Exchange plans profit to insurers whose Exchange plans lose money. Again, the idea is to reduce the insurer anxiety either that their plan and their marketing (if any) happens to attract an unhealthy pool or that they selected a premium too low for the actual risk that materializes. Finally, 42 U.S.C. § 18063, the only program that is supposed to persist past 2016, imagines an incredibly complex system in which the risk posed by an insurer’s pool is assessed and the states or, in their default, the federal government (see 42 U.S.C. 18041(c)(1)(B)(ii)(II)), transfers at least some money from those with the riskiest pools to those with the least.
Will these provisions really rescue the insurers?
All of this might seem a comfort to insurers that might permit them to survive and continue in the Exchanges even if the pools are, on average, considerably more expensive than originally projected. But to get a better handle on the degree of solace these provisions might provide, we need to look at some of the limitations of these programs and the actual numbers.
Stop-loss reinsurance under 42 U.S.C. § 18061
First, let’s look at how much risk the transitional reinsurance provided by 42 U.S.C. § 18061 really slurps up. What I contend is that while this provision should — and probably did — lower the premiums the insurer would otherwise need to charge to avoid losing money, it does less to rescue insurers if the pool is less healthy than they foresaw. While to really see this, we need to get deep into the weeds and do some math, I’m going to hold off on that fun for now. We have to save some things, such as the Actuarial Value Calculator, for other blog entries. I believe I have developed a plain English explanation that gets us most of the way there.
The key concept is to recognize that sophisticated insurers (are there other kinds?) took the free reinsurance into account when they priced their policies. They computed an expected value of the reinsurance reimbursements and lowered their rates by something approximating that amount. They were able to charge lower rates than they otherwise would because some of the claims bill would be picked up by the government. But this does not mean that the insurers end up having profits that are insensitive to the actual claims incurred by their pool. Unless all of the higher-than-expected claims are stuffed into the zone in which the reinsurance kicks in ($60,000 to $250,000), the insurers will be hurt when the pool has higher claims than expected. But such an assumption is incredibly implausible. If the insurer assumed that only, say, 2% of its insureds would have claims between $20,000 and $25,000 but, as it turns out, 4% of its insureds have such claims, nothing in 42 U.S.C. § 18061 will help such an insurer with that unanticipated loss. Moreover, because the reinsurance even within the relevant zone is incomplete, the insurer will lose money if claims between $60,000 and $250,000 are higher than expected. The effect of the transitional stop-loss reinsurance on reducing the consequences of adverse selection is thus likely to be small.
In the end, what this transitional reinsurance mostly does is mostly to tax non-Exchange policies $63 per covered life in order to make policies within the Exchange more attractive to policyholders. And, yes, that fact should make Exchange-based policies cheaper and reduce the problem of adverse selection. After all, if the insurance were free presumably there would be little adverse selection — everyone would get it. But the reinsurance fails to reduce insurer vulnerability to adverse selection much more than, say, providing more generous tax credits and cost sharing reductions would have done. If the pool ends up being less healthy than the insurer anticipated — an almost certain consequence of lower-than-expected enrollments, 42 U.S.C. § 18061 is hardly going to end up relieving the insurer of most of the unhappy consequences of having written policies in that environment.
Footnote: There is one more wrinkle, but it only means that the transitional reinsurance is a yet weaker rescue vehicle: the government’s obligations under the transitional reinsurance provisions are limited. There’s “only” $12 billion in 2014 and this ramps down to $4 billion in 2015. If those amounts aren’t adequate to pay reinsurance claims, each claim gets reduced pro rata. The reason I relegate this point to a “footnote,” however, is that if the pools are really small then even if claims per person are way higher than expected, the aggregate amount of claims in the reinsured zone of $60,000 to $250,000 aren’t going to be that big. My back-of-the-envelope computation suggests that the $12 billion allocated for transitional reinsurance should not be insufficient unless at least 2 million people enroll on the exchanges; since right now we are almost certainly at less than 100,000, 2 million seems a lot of insureds away.
“Risk Corridors” under 42 U.S.C. § 18062
The biggie in this field is the “Risk Corridors” provisions contained in 42 U.S.C. § 18062. It essentially creates this massive transfer scheme, taking money from insurers who had profitable pools and giving it to those who did not. In some sense, it converts insurers from entities bearing risk to mere fronts for government funded health insurance. If I were prone to accuse the Affordable Care Act of creating “socialized medicine,” my Exhibit A would be the stealth “Risk Corridors” provision of 42 U.S.C. § 18062.
The graphic below shows how the scheme works. The x-axis of the graph shows hypothetical aggregate net premiums (what 18062 calls “the target amount”) an insurer might receive for some plan in some state. The y-axis shows the profits the insurer receives as a function of those aggregate net premiums assuming that claims (a/k/a “allowable costs”) are $11.4 million. The purple line shows what profits would have been as a function of premiums if 42 U.S.C. sec. 18062 did not exist. The blue line shows what profits will be after the payments required by 42 U.S.C. 18062 are taken into account. The khaki-shaded zone shows the payments insurers are supposed to receive (and the Secretary of HHS supposed to pay) under the statute. The green zone shows the payments insurers are supposed to make (and the Secretary of HHS supposed to receive) under the statute.
We can create a similar graphic in which the role of claims and premiums is reversed. The x-axis of the graph shows hypothetical aggregate claims costs (what 18062 calls “the allowable costs”) an insurer might receive for some plan in some state. The y-axis shows the profits the insurer receives as a function of those aggregate claims costs assuming that net premiums are $8.6 million. The purple line again shows what profits would have been as a function of premiums if 42 U.S.C. sec. 18062 did not exist. The blue line again shows what profits will be after the payments required by 42 U.S.C. 18062 are taken into account. The khaki-shaded zone again shows the payments insurers are supposed to receive (and the Secretary of HHS supposed to pay) under the statute. The green zone again shows the payments insurers are supposed to make (and the Secretary of HHS supposed to receive) under the statute.
If one looks at the slope of the blue lines — the ones that show profits after 18062 risk corridors are taken into account — they are much less steep for most of the domain than the purple lines — the one that show profits before 18062 risk corridors are taken into account. What this means is that, in some sense, it doesn’t matter to insurers all that much whether they price too low or too high, whether claims are lower than they thought or — due to adverse selection or otherwise — higher than they thought. Either they are going to pay money to the government or they are going to get money from the government. The risk of writing policies in the Exchange is greatly diminished.
In some sense, then, if section 18062 (1342) is fully implemented — an issue to which I will shortly return — insurers don’t act very much as profit-making enterprises within the Exchange making or losing money on the spread between premiums and claims. (This is even more true after the corporate income tax is taken into account) Instead, they are almost fronting for the government, providing their license, their claims processing abilities and their credibility to a scheme in which the government really bears the risk associated with the new Exchange-based system of providing insurance. A cynic might term the Exchanges as having gone 80% of the way towards a single payor system in which there is but minor variation in the benefits offered by insurance policies and claims processing contracted out to various insurance companies with the experience to do so.
The incentives issue
There are several implications of this consideration of 42 U.S.C. 18062. The first is to consider what incentives the system sets up for insurers. My tentative belief is that it incentivizes insurers to offer a low premium if they want to go into the Exchanges and this statutory provision may explain in substantial part why insurers priced their policies at rates lower than most expected. Let me see if I can sketch out the argument. If the insurer prices high, they are going to get very little business. Other insurers will take their business away by going low. If they price low, they will get a lot of the business. Sure, they may lose money if they price too low, but, if so, the government will reimburse them for most of their losses. And if they price right or still too high, they can make some money.
The graphic below illustrates this concept. The x-axis shows possible premiums the insurer might charge. The y-axis shows the profit of the insurer associated with that profit. As one can see, before section 18062, the insurer does best to charge about $2,840 in premiums; after 18062, the insurer does best to charge about $2,677 in premiums. Although the assumptions chosen to produce this graphic were somewhat arbitrary, it is interesting and suggestive to me that the magnitude of the reduction in premiums is roughly similar to that observed in the actual market place in which premiums came in several hundred dollars below that originally projected.
The imbalance issue
There’s a second issue suggested by the two graphics above (the ones with the shading) showing the effect of premiums and claims on profitability. They highlight that there is is no reason to think that the amount the Secretary receives will be equal to the amount the Secretary takes in. That would be true only if insurers happen, in aggregate, to price the policies just right. If insurers have underpriced the policies because they expected a larger — and correlatively healthier — pool, the graphics may quite accurately reflect what occurs and the Secretary will be obligated to pay out far more than the Secretary takes in. I have found no one who has written on this problem, no one who can explain where the money will come from to make the needed payments, or what mechanism will be used to reduce payments in the event, as I suspect, there will be an imbalance between the money collected and the money the Secretary is supposed to pay out.
And one final thing
Extra credit: Can anyone spot the uncorrected typo in 42 U.S.C. 18062? For answer, look here.
Risk Adjustment Under 42 U.S.C. §18063
The transitional reinsurance and risk corridors provisions only last until 2016. After that, assuming the Affordable Care Act survives in something like its present form for that long, insurers are protected from adverse selection only by the sleeping giant among the trio of protection measures: the “risk adjustment” provisions in ACA section 1343, codified at 42 U.S.C. §18063. The idea here is to equalize the playing field for insurers not based on the amount they actually pay out in claims (stop-loss reinsurance) or their actual profits (risk corridors) but on the risk they took in accepting insureds. It thus envisions this massive bureaucratic scheme whereby each individual purchasing a policy on an Exchange is scored (based on a complex federal methodology involving “Hierarchical Condition Codes“) and then, the insurers with high scores get paid by the insurers with low scores with the Secretary of HHS figuring out exactly how it works. To do this, the Secretary will need masses of sensitive information, including fairly granular accounts of the medical conditions of each person enrolled on an Exchange. The idea in the end, though, is to calm insurer fears that because of peculiarities of their plans, bad luck, or other factors, they tend up with a worse than average pool.
This provision will not save the Affordable Care Act from an adverse selection death spiral if enrollment stays low. This is because Risk Adjustment simply protects insurers from worse-than-average draws from the pool of insureds purchasing Exchange policies. It does nothing to protect insurers from having an overall pool of insureds purchasing Exchange policies that is higher risk than anticipated. If that larger pool is high risk on average, however, insurers will need to price their policies high, which will lead the lesser risk insureds to drop out, which will result in prices being raised again — the death spiral story.
The Bottom Line
The bottom line here is that two of the provisions (18061 and 18063) that purport to protect insurers from adverse selection really do little to protect insurers from the sort of adverse selection that is now appearing quite likely to develop: lower risk persons staying out of the Exchanges, period. The remaining provision, 18062, “Risk Corridors” in theory could give insurers some confidence that they will not lose their shirts if the pool stays small and high risk. But this is only true to the extent that insurers believe the Secretary of HHS will find some currently unknown pot of money with which to make payments when the number of insurer losers in the Exchanges far outstrips the number of insurer winners. If insurers doubt that the Secretary will be able to find the money and may simply resort to some pro-rata reduction in payouts under 18062(b)(1), they will have be less pacified in what must be their growing fears that the pool of insureds inside the Exchanges will, on balance, be far higher risk than they anticipated. And, if the Secretary finds money with which to honor the promises in section 18062, look for protests from those who were told that the Affordable Care Act would not have all that large a price tag.
Late Breaking News
As it turns out, the reinsurance and risk adjustment provisions are in the news today in an elliptical remark made at the end of a letter sent by the Center for Consumer Information & Insurance Oversight (CCIIO) that implements President Obama’s transitional “fix” with respect to canceled nongroup policies. He states:
Though this transitional policy was not anticipated by health insurance issuers when setting rates for 2014, the risk corridor program should help ameliorate unanticipated changes in premium revenue. We intend to explore ways to modify the risk corridor program final rules to provide additional assistance.
I believe this passage amounts to recognition by the President that providing a non-Exchange insurance substitute for generally healthy people who otherwise likely would have gone into the Exchanges will end up making adverse selection worse and further increase likely losses by insurers writing in the Exchanges. This, by the way, is why insurers are apparently furious about the President’s “fix.” The question, though, is where is the money going to come from to make the insurer’s whole. The statute appears to envision a zero sum game in which the winners compensate the losers. It does not appear to contemplate what seems ever more likely to occur: a game in which the only winning move is not to play.
If you are interesting in this topic, you should read the articles by Professor Mark Hall. I don’t alway agree with Professor Hall, but I have tremendous respect for his analysis. He is, in my view, one of the leading scholars with a generally positive view about the Affordable Care Act. You can find the articles here and here.
Note: this entry will likely be updated today as new information comes in.
President Obama is stating right now that the Executive branch of the federal government will fix the problems created by insurer cancellation of many individual health policies by forcing insurers to renew cancelled policies. It may be that state insurance commissioners will be able to veto this imposition within their own states.
A number of legal and economic issues are created by this proposal. I sketch them here.
1. Where does President Obama get the authority to issue such a regulation? The President can not rule by decree and it will be challenging to figure out what statute authorizes him to undo parts of the Affordable Care Act that would have prohibited insurers from selling such policies. Perhaps the President will argue that all he is doing is directing the Secretary of HHS and other executive officials not to prosecute or otherwise punish insurers for selling policies without Essential Health Benefits but only with respect to policies they had just recently cancelled? Or possibly he might expand the definition of what it means to be “grandfathered.” In any event, there is a separation of powers issue here worth thinking about.
But, if I am hearing the President correctly and reading news accounts properly, I am wondering who will have “standing” to challenge the ruling since no one appears to be forced to do anything. If I’m reading things incorrectly and insurers are indeed going to be forced to uncancel, then, unlike earlier expansionist views of executive authority such as delay of the employer mandate, there will definitely be institutions with “standing” — some insurer that does not want to renew — to challenge the ruling.
As one might expect, law professors are opining on the legality of the President acting here without congressional authority. Professor Eugene Kontorovich from Northwestern University Law School has published a quick piece on The Volokh Conspiracy, a leading conservative-libertarian blog, arguing that the President’s fix violates separation of powers. He also cites to the letter actually sent by CMS to State Insurance Commissioners explaining the President’s ruling.
2. From what I am now hearing, it appears that insurers will not be forced to reissue these policies. Nor will state insurance commissioners be forced to authorize sale of these policies. That should eliminate federalism issues or possibly due process issues. Otherwise there would have been a question as to whether forced insurance by the federal government — whether done by a legislature or through executive action — violates any independent protections of the Constitution? Assuming this is regulation of interstate commerce, nonetheless neither the executive nor the legislature can take property without just compensation and, on occasion, this provision has been interpreted to encompass regulations that effectively take property.
3. Assuming insurers accept the President’s invitation, doesn’t this create more problems for the Exchange? The hundreds of thousands or millions of people who are potentially being helped here are people who have recently been medically underwritten and are most likely healthy. If these people have the chance of being forced into a pool in which there is no medical underwriting and one in which there is, many will opt — even if there is no subsidy — into the underwritten pool, particularly if the Exchange policies offers a feature/price mix that they do not want. But the withdrawal of these people from the Exchange pools makes it ever more likely that an adverse selection death spiral could develop in the Exchange. The horse journalists and others should be beating now is not about breaches of promise — that’s been thoroughly discussed — but about how insurers who have agreed to write policies in the Exchange on one set of assumptions about the pool are going to react when those assumptions change.
One of the fixes being seriously considered this week to address the “discovery” that the Affordable Care Act will not permit all people to keep the health insurance plan they may previously had in effect is H.R. 3350, a bill that would permit — though not require — insurers to continue to offer all individual insurance plans they had in effect at the start of 2013 and to treat such plans as “grandfathered” even when, perhaps, they would not be so treated under either the existing Affordable Care Act or the regulations promulgated thereunder. Unfortunately, this “Keep Your Health Plan Act of 2013” is likely to cause more problems than it solves. I also think there may be some technical problems with the bill that someone ought to think about.
The reason the Keep Your Health Plan Act will create problems is that, contrary to the rhetoric formerly used by its supporter-in-chief, the success of the Act depends precisely on many people not being able to keep their healthcare plans. And contrary to the Renaultian shock now being exclaimed by many politicians, depriving people of their existing individual health insurance plans, was part of the plan all along. Since the Affordable Care Act is an intricately woven web of provisions, it may well not be possible simply to excise one part without fatally destabilizing the remainder of the bill.
First, as to the allegation that depriving people of their individual healthcare plans was part of the plan all along, I offer several exhibits. To set the background for the evidence, consider that a central philosophical tenet of what became the Affordable Care Act was that medical underwriting of health insurance was unfair because it punished those who, often through no fault of their own, had poor health to begin with, and created needless hardship as a result of their resulting inability to obtain efficiently delivered American-style healthcare. The “genius” of the Affordable Care Act was the notion that one could remedy this problem not just through the previously advanced — and previously rejected — idea of expanding single payor systems such as Medicare in which the government provides insurance, but in a way that preserved at least the fig leaf of a private, entrepreneurial insurance system. And the intellectual key to that alternative path of assuring insurance equality was to show, contrary to the prevailing wisdom, that private insurance could in fact function in an appropriately structured health insurance marketplace notwithstanding the absence of medical underwriting ordinarily thought necessary to prevent an adverse selection death spiral.
The RAND studies
And studies there were that supported the idea that, with appropriate penalties for failing to purchase insurance and with a large enough pool enrolling in the nascent Health Insurance Exchanges, the market could stabilize without a fatal adverse selection death spiral taking place. Consider the various studies undertaken by the RAND corporation, one of the nation’s longest standing think tanks and one not known for being given to sentimentality. The first study undertaken by RAND in 2010 found that the number of persons in the “Nongroup” (a/k/a individual) market for health insurance would decline as a result of enactment of an ACA predecessor from the existing 17 million in 2013, to 5 million in 2014 and then down to 0 by 2016.
RAND does a second study as the actual Patient Protection and Affordable Care Act (which is the same thing as the Affordable Care Act and the same thing as Obamacare) is enacted. This one is commissioned by the United States Department of Labor. As shown below, the study likewise concludes that of the 18 million they now believe will be enrolled in nongroup health insurance prior to 2014 essentially none will be left; 14 million will migrate to the Exchanges and 4 million will find their way into employer-sponsored insurance. No one will have “kept their plan.”
The CBO and Other Government Assertions
But it was not just RAND that was assuming that many persons with individual health insurance policies would be impelled to enter the Exchanges, in which policies with Essential Health Benefits and other expensive protections would prevail, it was also Congressional Budget Office, another source relied upon critically in forecasting the effects of what was becoming the Affordable Care Act. Consider the CBO’s letter of November 30, 2009, to Senator Evan Bayh. It estimates that 5 million people (14 million now outside Exchanges; 9 million left by 2016) will be move from nongroup coverage to coverage inside the Exchanges. While some of these may move voluntarily, there is no assertion that all will cheerfully accept the “better” coverage offered inside the Exchanges. The key quote comes in an explanation of why the ACA will actually lower premiums.
CBO and JCT estimate that about 32 million people would obtain coverage in the nongroup market in 2016 under the proposal, consisting of about 23 million who would obtain coverage through the insurance exchanges and about 9 million who would obtain coverage outside the exchanges. Relative to the situation under current law, with about 14 million people buying nongroup coverage, the different mix of enrollees would yield average premiums per person in that market that are about 7 percent to 10 percent lower.
That estimate of 5 million people is reiterated in a March 2010 letter from the CBO to Senator Harry Reid in which the CBO attempts to compute the costs of the ACA. The table below (a screen capture edited to delete unimportant parts) shows the computation.
Finally, there is what some have called the “smoking gun” contained in the pages of the June 17, 2010 Federal Register, a document (shown below with yellow highlighting) that captures the official views of the Department of Health and Human Services. Although the document does not state the movement out of non-group policies and into the Exchanges would be entirely voluntary, it is difficult to believe that with 40 to 67% moving, all would be doing so cheerfully and because they just “did not like” their existing healthcare plan.
Whether President Obama knew of this issue or at what level of detail is unclear. The Republican party is currently running an emotionally charged “stray cats and dogs video” containing some remarks of the President in 2010 from which those undisposed towards him might infer that he was aware of the issue. There are, however, a number of ways of interpreting the President’s elliptical and metaphorical remarks and it may remain to future historians to discern whether the President was simply unaware of the detail that some Americans might be forced from health plans that they truly liked to dispreferred coverage in the Exchanges or whether he, perhaps like some around him, simply regarded that inevitability as a cost of reforming a major American institution in which it was completely bizarre to think that no one at all would be hurt.
The MIT/Gruber Analysis
A leading academic proponent of the Affordable Care Act and consultant to the Obama administration during its development has been MIT economics professor Jonathan Gruber. (He’s also, by the way, the author by the way of a fantastic (if sometimes fairy tale-esque) graphic novel on Health Care Reform). Professor Gruber’s work has been instrumental in persuading people that an appropriately structured health insurance market can function even in the absence of medical underwriting. In 2011 and under the auspices of the National Bureau of Economic Research, Professor Gruber attempted to assess how reasonable were the projections made regarding the Affordable Care Act and the CBO’s earlier contention that it would actually lower the federal deficit. Here is what he thought would happen with the individual market. He thought those who moved from the existing nongroup market to the exchanges would find their premiums increasing 27-30% as a result. (page 16). He deprecated the potentially significant negative implications many might draw from such a finding by contending, however, that the purchasers would be rewarded with somewhat better policies: “[g]iven that the minimum standards are fairly modest, however, it seems likely that most of the increase in plan quality reflects voluntary upgrades.” (page 16). Thus, Professor Gruber did not contend that all would be better off as a result of the prohibition on non-grandfathered policies sold without Essential Health Benefits; he simply contended (possibly with some accuracy) that most would.
They knew and they understandably did nothing
So, if the people in the know knew, why did they do nothing about it.? Why did they not insist that the people be able to keep their health plans even if they evolved and not be impelled to purchase possibly better but possibly more expensive policies inside the Exchanges? And the answer is that they did nothing about it because they needed those people to sacrifice in order to make the whole scheme work. And so long as those people were the faceless masses — the anonymous red shirts of a Star Trek landing mission — it all made sense. They needed those people inside the Exchanges because many of them would have been recently medically underwritten and have low medical costs. They needed them because pushing people with low medical costs inside the Exchange was what was needed — and is still needed today — to make a health insurance marketplace without medical underwriting work. They needed them to prevent the adverse selection death spiral. They were, in short, expendables, and, besides, were getting something better than they had even if they did not value it properly.
And what was perhaps sadly true back in 2010 is sadly true today. The Exchanges are already unbelievably fragile and becoming more unstable each day that healthcare.gov stays more the butt of jokes than of a system for purchasing insurance. They are even more likely to break if people — the ones with low expected medical expenses — are permitted to separate themselves out and permitted to purchase cheaper and possibly less lavish policies outside the Exchanges. In economics, one might think of the availability of off-the-Exchange lower-benefit policies as permitting a “separating equilibrium” in which the healthier group stay in the tin policies found outside the Exchanges and the more expensive group head for the bronze, silver, gold and platinum to be found inside the Exchanges. And while one might think that everyone would be happy with this broader set of choices, the problem is that the removal of a large chunk of healthy people from the Exchanges means that there will be tremendous pressure on prices inside the Exchange to go up. The discrimination against the unhealthy, opposition to which formed an intellectual premise of the Affordable Care Act, will reappear.
So, do not expect insurers to take the Keep Your Plan Act lying down. Insurers priced their policies inside the Exchanges on the assumption — that sophisticated people knew about — that the Exchanges would be receiving an influx of generally healthy people that had recently been underwritten for insurance outside the Exchanges. Insurers knew — because they had the power to make it so — that those people would be receiving cancellation notices from their insurers and would thus have a choice either to go bare or to purchase policies inside the Exchanges. Insurers banked that many of them would invigorate the pools inside the Exchanges by choosing to purchase policies there. Take all that away, and many insurers will begin to regret — even more than I suspect many of them do as the debacle of healthcare.gov and the enrollment figures become ever more clear — that they ever supported the Affordable Care Act or thought there was gold in the hills of the Exchanges.
Insurers are not without recourse. There is little I know of that prevents the insurers from walking out of the Exchanges. Some have cancellation clauses built in to their contracts and it would create interesting contract litigation if some insurers decided, notwithstanding the existence of such cancellation clauses, simply to refund the advance premiums of prospective policyholders and say that they were not going to play. Note for contracts professors only: voluntary restitution in lieu of performance where performance is prevented by government order under Restatement (Second) of Contracts section 264?
But even if the spectre of mass cancellations for 2014 is unrealistic, insurers have to start planning real soon if they want to continue in the Exchanges in 2015. One expert at a conference in which I served as moderator contended that insurers will likely need to make a decision in April 2014 because that is when they will need to start submitting proposed new rates to insurance regulators. And every single day brings a new alarm bell suggesting they should not. The individual mandate might be delayed or cancelled. And although the individual mandate for 2014 is rather weak, still, such a delay will dilute further any otherwise existing incentives for the healthy to enroll in the Exchange. Healthcare.gov continues not to work well — it is revealed today that even the poor “Glitch Girl” apparently hasn’t tried to sign up. And now a broad spectrum of legislators and at least one former Democratic President — either embarrassed by what now appears to have been an untruth and/or cowed by the faces of earnest Americans being attached to what was heretofore treated as “statistics” — want to remove a source of potentially healthy insureds from the Exchange pools.
To be sure, there remain some protections for insurers who stay in. The little-discussed but, as it may turn out, unbelievably important “reinsurance and risk adjustment” provisions of the Affordable Care Act (42 U.S.C. 18061-063) may limit the losses insurers will suffer even if horrible adverse selection results from the confluence of events and hasty reforms. And, of course, if the enrollment numbers remain as infinitesimal as they now appear to be, not much matters. Even if premiums are off by a factor of 2, insurers in an absolute sense can’t lose all that much money if only 100,000 people ever enroll.
The Fix is not really a Fix
There are two other matters to discuss with respect to H.R. 3350. The first is use of the word “may” and the second is a technical problem.
“May” not “Must”
The key thing to recognize is that H.R. 3350 does not force insurers to restore insurance that they recently cancelled. Nowhere does H.R. 3350 say “must” or “shall.” Instead, it just says that insurers “may continue” to sell the policies they had in effect on January 1, 2013. It says only that, if they do so, they will not be treated as selling some sort of unlawful insurance prohibited by the Affordable Care Act. Thus, if insurers decide for whatever reason that they would rather not continue with those policies but would rather see those people inside the Exchanges, there is nothing in the Keep Your Health Plan Act that forces insurers to try and reverse their recent actions. As a result, some insureds will not be able to keep their health plans although failures in such respect will be more clearly the result of insurer choice than of federal compulsion. This, of course, may come as small consolation to those who truly liked their still cancelled old health insurance plans.
A Technical Problem
There may also be a technical problem with H.R. 3350, a bill that surely has been drafted in haste. The bill says that an insurer that had insurance in place on January 1, 2013, can continue to sell it notwithstanding the rest of the Affordable Care Act. And, if they do so, they will be treated as selling a grandfathered plan. The problem is that insurers could already do this. So long as the insurer did not change the policy a whit, the insurer could, under the existing ACA, continue to sell that policy in 2014. (A good source on grandfathered plans, by the way, is this Congressional Research Service report.) And that was true, even if the policy failed to provide Essential Health Benefits.
The question is whether an insurer can modify a plan that it sold in January 1, 2013 and still sell it in 2014 even though it does not provide Essential Health Benefits or afford other protections given to Exchange-traded policies. While one assumes it was the intent of the bill sponsors that an insurer be permitted to do so — otherwise what, exactly, is the point of the statute — such a reading places a strain on its language. The bill, after all, says, “may continue after such date to offer such coverage for sale during 2014.” But the “such coverage” is, at least grammatically, “health insurance coverage in the individual market as of January 1, 2013.” While I have doubts about the wisdom of the Keep Your Health Plan Act, I suppose I am majoritarian enough to believe that if it passes, it at least should do the minimum of what its sponsors intended.
The Real Problem with Reform
The real problem with reform of the Affordable Care Act is that is such a tightly integrated statute. It lacks a severability clause — a provision that says if one part of a statute is struck down the rest can go on — and although no one knows why omission of such a common provision occurred here, it is possible it occurred because the drafters knew much of the statute would be extremely difficult to sever in an intelligent way. If you make it easy for people to really keep their health plans, that makes it harder for Exchanges in which an anti-discrimination norm prevails to price policies affordably, which in turn creates a need for ever bigger federal subsidies. I suspect that as the flaws in the Affordable Care Act become ever more apparent in the days ahead, the difficulties of simply excising the disfavored parts will likewise become ever more clear. Healthcare reform in the United States can not be achieved by magic.
This blog is going to chronicle what I believe will be the implosion of the Affordable Care Act. I do not believe the Exchange based system of providing health insurance without medical underwriting is likely to work or that, if it does, it will not need far more massive propping up from federal taxes than is conventionally recognized. We’ll be looking at current events, the history of the Act, important court cases, and regulatory developments. Our tools will be a careful review of primary documents, some graphical and mathematical analyses, and references to important and insightful articles written by others.
Also, there is more to the Affordable Care Act than the Exchanges. There is more than the individual mandate. There is the employer mandate, the complex systems of federal reinsurance needed to backstop the Act, the reintroduction of medical underwriting under the “wellness label” and so much more. We’ll try as time permits to take a look at developments in these important areas too.
I recognize that many are writing on this topic and that it will be hard to stay a pace of such a fast moving target. But I do feel that there is a need for some hard and at least somewhat scientific look at what is going on. It will be my goal and burden to try to provide that in the months ahead.
Oh, and who am I? I’m Seth Chandler, a law professor at the University of Houston Law Center. I’ve taught insurance law, including life and health insurance law, for many years, been a co-director of the Health Law & Policy Institute, and done considerable work on the economics of insurance and its regulation. I’ve been very active using Mathematica, a system for doing mathematics by computer, and have shown how this tool can be used to analyze legal systems and many issues in insurance law such as adverse selection, moral hazard, correlated risk and a variety of issues in life, health, property and casualty insurance.
I should also add that the views expressed here are my own and do not necessarily reflect those of the University of Houston.
Exploring the likely implosion of the Affordable Care Act