Incumbent regulation and adverse selection: You can keep your health plan, but at what cost?

Sebastian Fleitas, Gautam Gowrisankaran and Anthony Lo Sasso
Authors registered in the RePEc Author Service: Anthony Lo Sasso

Journal of Public Economics, 2022, vol. 205, issue C

Abstract: The 2010 Affordable Care Act (ACA) instituted incumbent regulation policies in the small group market, where existing health plans could choose to defer compliance with ACA regulations. This created incentives for employers with lower expected healthcare costs and greater uncertainty to not immediately become ACA compliant. We use unique national data with over 300,000 employer-years from 2013 to 2017. Consistent with these incentives, we find that employers with healthier enrollees and those with more turnover were more likely to not immediately comply. This created adverse selection in the ACA-compliant market, increasing its annual healthcare costs by $365 per individual in 2014.

Keywords: Small group market; Health insurance; Community rating (search for similar items in EconPapers)
JEL-codes: H51 I11 I18 L51 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:205:y:2022:i:c:s0047272721001924

DOI: 10.1016/j.jpubeco.2021.104556

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