Prices Drop as the Affordable Care Act is Implemented

The health insurance premiums announced today for the new health insurance exchanges for New York were far lower than their current individual health insurance market. This is great news for the thousands of New Yorkers who will see their premiums fall, and for the many more thousands who will be able to find affordable coverage when they couldn’t before. This is a promising sign that the health insurance exchanges established in the Affordable Care Act (at least in states taking implementation seriously) could work as planned and improve the range of affordable choices available to consumers.

On the flip side, today, the US House of Representatives voted to postpone implementation of the individual mandate, the provision of the ACA that requires that Americans are covered by health insurance, even if they have to buy their own. Postponing this provision would be a huge mistake.

A key feature of the ACA is that it requires that insurers offer coverage to everybody, and at a common price (subject to some variation based on age and whether or not you’re a smoker). If these requirements existed without a provision to stop free-riding (the individual mandate), too many healthy people would wait until they got sick before they enrolled in insurance and started paying premiums. This means that the insurance pool at any point in time would be less healthy, and thus more expensive, than it would be under the mandate. Simply put, the individual mandate makes health reform considerably more efficient.

Research has found that removing the individual mandate from health reform will significantly reduce the number of newly insured individuals, likely among the healthiest. Doing away with the individual mandate would also make premiums more expensive for those who remain in the market and purchase insurance. A significant reason why New York’s health insurance premiums are much lower than the current marketplace is because individuals—including the healthy, inexpensive ones—must purchase insurance under the ACA.

It is ironic that the same week that New York announces good news on prices—good news spurred in part by the individual mandate, the US House of Representatives votes to repeal it. Of course, making health reform efficient has not been a marker of GOP-led reform efforts over the past decade.