October 27, 2016
The New York Times had a major adventure in fantasy land when it ran a front page article asserting that the problem with the health care exchanges under the Affordable Care Act is that the penalties have not been large enough to coerce people into getting health care insurance. The begins by telling readers:
“The architects of the Affordable Care Act thought they had a blunt instrument to force people — even young and healthy ones — to buy insurance through the law’s online marketplaces: a tax penalty for those who remain uninsured.
“It has not worked all that well, and that is at least partly to blame for soaring premiums next year on some of the health law’s insurance exchanges.”
The piece then explains that many people are opting not to buy insurance and instead pay the penalty.
The problem with this line of argument for fans of reality is that the number of uninsured has actually fallen by more than had been projected at the time the law was passed. This is in spite of the fact that many states were allowed to opt out of the Medicare expansion by a 2012 Supreme Court decision making expansion optional. (It was mandatory in the law passed by Congress.)
It is not difficult to find the evidence that the number of uninsured has fallen more than projected. In March of 2012, the Congressional Budget Office and the Joint Tax Committee projected that there would be 32 million uninsured non-elderly people in 2015. Estimates from the Kaiser Family Foundation put the actual number at just under 29 million. In other words, three million more people were getting insured as of last year (our most recent data) than had been projected before most of the ACA took effect.
So, if more people are getting insured than had been expected, how could the penalties have been a failure? I leave that one for the folks at the NYT responsible for this front page story.
I will add one other item in this story worth correcting. The piece includes a quote from Joseph J. Thorndike, the director of the tax history project at Tax Analysts, telling readers:
“If it [the mandate] were effective, we would have higher enrollment, and the population buying policies in the insurance exchange would be healthier and younger.”
While we do care whether the people in the exchanges are healthy, it doesn’t matter if they are young. In fact, healthy older people are far more profitable to insurers than healthy young people since their premiums are on average three times as high. There is a slight skewing against the young in the structure of premiums, but this has little consequence for the costs of the system.
As a practical matter, the people signing up on the exchanges are probably somewhat less healthy than had been expected, but this is largely because more people are getting insurance through employers than had been expected. The people who get insurance through their employers are more healthy than the population as a whole, since for the most part they are healthy enough to be working full-time jobs.
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