Collaborative Research: Evaluation of ACA Reform

Northwestern University, Evanston IL

Investigators

Abstract

At the core of the Affordable Care Act (ACA) is the "individual mandate" law. Under this law, each individual in the ACA's "health insurance exchanges" needs to buy coverage or pay a penalty. Individual mandate has perhaps been the most controversial part of the ACA. This research aims at answering two crucial questions about this law. First, by how much would the uninsurance rate increase after lifting individual mandate? Second, to what extent could the proposed replacements to this law mitigate the negative impact of that lift on coverage? This research develops an economic model of healthcare exchanges that incorporates asymmetric information and consumer dynamics. It allows for heterogeneity in health statuses of individuals, enabling it to capture adverse selection -- the main reason why the market could collapse without individual mandate. The model is dynamic, allowing it to capture consumers' foresighted decision making. This is crucial for evaluating the impact of the proposed replacements to individual mandate, which all penalize consumers who stay uninsured today with restricted access to health insurance in the future. Using the model, the investigators examine how different ways to replace or reform the ACA might affect the performance of the health insurance exchange and the consumer welfare. This award reflects NSF's statutory mission and has been deemed worthy of support through evaluation using the Foundation's intellectual merit and broader impacts review criteria.