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Abstract

Opponents of the Affordable Care Act (ACA) no longer seek explicitly to "repeal and replace" this widely popular law. Instead, opponents increasingly have turned to promoting deregulated alternatives like short-term health insurance, association health plans, and ministries that circumvent the ACA’s core requirement requirements, claiming that they offer better coverage options at substantially less cost. This essay explains, however, why comprehensive health insurance cannot remain affordable if the ACA's core regulatory structure is easily avoided.

The key insight is that, because health care costs are highly skewed across the population —such that the top 20% of spenders account for 80% of total health care costs—less regulated markets inevitably face serious "adverse selection." Adverse selection results from healthy individuals purchasing cheap skimpy plans, leaving the regulated market with increasingly high-risk, expensive subscribers. At a minimum, that dynamic substantially increases prices for comprehensive insurance; unchecked, it can drive the market into an unsustainable "death spiral."

Consumer protection is another major, when purchasers do not realize how restrictive non- ACA insurance can be. To demonstrate this, a randomized controlled trial revealed severe consumer confusion regarding the deregulated "short-term" policies that are being sold in some states as long-term coverage. In a realistic simulation that clearly highlighted the key limitations to potential consumers, most of them failed to recognize that these "short-term" plans excluded essential benefits like prescription drugs, mental health care, and serious medical conditions that arise after the policy is purchased if the condition continues into a second year.

As a result, opponents' hopes for achieving a market that offers decent affordable health insurance cannot be achieved without a comprehensive structure that preserves something at least resembling the ACA's core regulatory and subsidy features.

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