Adverse Selection and an Individual Mandate: When Theory Meets Practice.
We develop a model of selection that incorporates a key element of recent health reforms: an individual mandate. Using data from Massachusetts, we estimate the parameters of the model. In the individual market for health insurance, we find that premiums and average costs decreased significantly in response to the individual mandate. We find an annual welfare gain of 4.1% per person or $51.1 million annually in Massachusetts as a result of the reduction in adverse selection. We also find smaller post-reform markups.
Department of Economics, Yale University.
Martin B
MB
Hackmann
Wharton School, University of Pennsylvania and NBER.
Jonathan T
JT
Kolstad
Department of Economics, Yale University and NBER.
Amanda E
AE
Kowalski
D018166:Health Care Reform / Q000191:economics*; D006801:Humans; D015273:Insurance Selection Bias; D007348:Insurance, Health / Q000191:economics* / Q000706:statistics & numerical data; D037141:Mandatory Programs / Q000191:economics* / Q000706:statistics & numerical data; D008404:Massachusetts; D008962:Models, Theoretical; D058991:Patient Protection and Affordable Care Act; D012946:Social Welfare; D013660:Taxes; D014481:United States