One of the big questions about the possible Supreme Court ruling on the Affordable Care Act is what would happen if only the individual mandate is struck down, but the rest of the law is left in place. Mainly, is simply providing subsidies enough to encourage new people to buy insurance? Sarah Kliff at Wonkblog seems to think we have very little data on this possibility, but I think she is missing something important. From Kliff:
Whether subsidies would be enough to encourage healthy people to enroll is hard to know, largely because we’ve barely tried it. One study of Massachusetts’s law — where subsidies became available before the mandate kicked in — only saw a big spike in coverage after the mandate came online.
That could be indicative of fewer people signing up — or it could be the same number of enrollees, just migrating into the program at a slower pace. Other insurance expansions, like the Children’s Health Insurance Program, saw enrollment grow slowly year after year, and is still continuing to tick upward.
While there are rarely any perfect analogies, I think our decades old employer-provided health insurance system is a much more relevant example than a few month window during the roll out of the Massachusetts law.
Our employer-provided health insurance system has very high enrollment among those who qualify, even though the system basically uses just subsidies to encourage enrollment.
How it works for most people is that their employer gives them the option to buy insurance with the employer paying much of the cost. If you choose not to get insurance through your employer you are effectively forfeiting this subsidy. Very few employers will give you the option to take the full value of this benefit in cash if you don’t sign up for insurance, so in practice it produces a simple binary choice. Buy subsidized insurance or lose this subsidy. The result over the past several decades is that most people who are given the option to buy subsidized health insurance from their employer end up doing so.
Probably the closest analogy to the ACA exchanges would be the Federal Employee Health Benefit program, which gives federal employees the option of buying subsidized insurance on an exchange. The subsidies alone have proven to be enough to encourage a large percentage of federal employees, including young healthy federal workers, to choose to take part in the system.
While subsidies in the FEHB are structured differently, it is strong evidence that sufficient subsidies alone are capable of encouraging a high level of enrollment in an insurance exchange.





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I’m wondering how much the level of subsidies matters. Logically, one would expect an employer-based scheme paid mostly by the employer to be heavily subscribed, but one would also expect that as employers shifted more costs via copays, deductions, limits and exclusions to the employee, that the voluntary sign up levels would fall.
I think the Fed employee program is heavily subsidized, so why wouldn’t people sign up? But if the ACA exchanges are much less subsidized, and subject to Ryan budgets, etc, you likely wouldn’t expect the same degree of sign ups.
Including a significant percentage of Republican members of Congress and their staffers who are supposed to be ideologically predisposed to reject government subsidies!
depends on your income level people between say 138-220% of FPL will have more subsidies than federal employees
Take a real good look at FEHB — the description of the available plans is on the OPM website. If you’re making a champagne salary ($100K+) you can get very good coverage — but if you’re making half that (or less) your choices are much less attractive.
Be sure to check just what each plan covers — it’s not the golden goose most people assume it is…
I’m a retired Federal employee, and I went with the plan that had the best prescription drug coverage. Minimal dental and vision coverage, and high deductibles. Mostly I pray that I don’t get sick, and that the blood pressure and fibromyalgia meds continue to be all I need.
Health insurance is a farce (and that includes FEHB), and Grayson was right — if you get sick be sure to die as soon as possible.
I’m a retired civil service employee. I guess I weighed the pros and cons of signing up for FEHB at some early age, but what I finally found was that the real benefit of the program is in OPM. You can always expect OPM to arbitrate a dispute fairly. Which fact (in my experience) invariably causes the insurer to reconsider their attitude toward your claim. They can’t just blow you off because they know you probably aren’t capable of sustaining a protracted effort. OPM is: so there goes that incentive. Therefore, the insured seldom gets screwed by the insurers Byzantine machinations of arcane contract clauses.
Real-life experience with employer-subsidized health insurance isn’t promising re the ACA. As health care costs have continue to rise faster than inflation – or wages – for decades, the “subsidy” has represented an ever-shrinking percentage of the actual cost of health insurance. And that’s for the employers that still offer coverage – their numbers have also been shrinking. As their out-of-pocket costs continue to rise and wages don’t, young healthy people will opt out of paying – either willingly as part of a cost/benefit analysis or out of necessity as health insurance becomes increasingly unaffordable. The reality is that the ACA – as it still essentially preserves the status quo of private health insurance, is ultimately as unworkable as doing nothing is. Regardless of what the SCOTUS does re the ACA, at the end of the day, we must move to a national single payer plan IMHO. Whether that’s Medicare-for-all or in some other form, it’s that or rationing of health care to those that can afford it – the preference of conservatives. Which Alan Grayson rightly described as “don’t get sick, or if you do, die quickly”.
Jon, doesn’t your analogy fail since it compares the old system in which persons could be denied coverage for preexisting conditions (and had a corresponding incentive to obtain coverage even if healthy) with the current system, in which people can obtain “insurance” even after developing serious illnesses?
After a thorough examination of this “Monumental Gift to the Health Insurance Industry”, I’ve concluded that for me the ACA is not affordable. I’ll be better off, should the mandate be upheld, to pay the fine, bargain with physicians, or go to another country for health care, rather than impoverishing myself.
The FEHB does not allow for denial for per-existing conditions and its open enrollment period works like they claim ACA will.
true – excellent point Jon
excellent post as always, David