If we cannot live with the individual mandate, can we cover enough lives without it? | LIVE STREAM

If we cannot live with the individual mandate, can we cover enough lives without it? | LIVE STREAM

David Hyman: All right, let’s get started.
So, thank you all for coming to the American Enterprise Institute. I’m David Hyman. I’m
a professor at Georgetown and an adjunct scholar here at the American Enterprise Institute.
I’m just looking at the binder and it says “Talk for AEI,” and I just realized it’s
our speaker’s talk, so I should focus on my notes rather than hers. Wendy Netter Epstein is a professor of law
at DePaul University College of Law and faculty director of the Mary and Michael Jaharis Health
Law Institute. She’s previously visited the University of Chicago Law School. She
went to the University of Illinois in Champaign-Urbana and has a JD from some school in Massachusetts
that all of you have probably heard of. But it turns out we actually have a somewhat Illinois-centric
set of speakers today. More on that when I introduce the rest of the panelists. But we’re here to talk about “If we cannot
live with the individual mandate, can we cover enough lives without it?” And more specifically,
Wendy is going to talk about her paper, “Private Law Alternatives to the Individual Mandate,”
as I’m sure everyone in the room understands. The PPACA, the Patient Protection and Affordable
Care Act, which goes by a whole series of other names depending on whether one likes
the legislation or doesn’t like the legislation, included an individual mandate, which ends
up — “repealed” is perhaps too strong a word. “Zeroed out” is probably a more
accurate description, taking effect in 2019. And so it sort of remains to be seen what
the consequences of that legislative action will be. Some of the states have responded
by enacting their own individual mandates. Massachusetts had one that predated the PPACA.
New Jersey and Vermont and DC have since enacted ones, and they’ve taken effect. And California
and Rhode Island have also enacted legislation that will take effect in 2020. That’s the
sort of latest count on that. But Professor Epstein is here to talk about
something somewhat different, which is, if your state doesn’t elect to enact an individual
mandate, what are some private law alternatives — self-help, if you will — that insurers
could engage in to try and address the same issues that the individual mandate was intended
to? And so she’s going to talk about this very interesting paper. And then we’ve got
a distinguished panel that come and give their own perspectives on it, and I’ll mostly
play traffic cop and keep time. So, with that, let me give you Professor Wendy Netter Epstein Wendy Netter Epstein: Thank you, David. And
I also I want to thank Tom Miller and the American Enterprise Institute for having this
forum today. And I’m going to pre-thank in advance the other panelists, Shari Westerfield,
Tony LoSasso, and Christopher Robertson, for what I’m sure is going to be an engaging
and productive discussion. So, as Professor Hyman already mentioned,
my talk is on private alternatives to the individual mandate. It’s really stems from
a paper that I have coming out in the Minnesota Law Review. But this projects — the reason
that I started working on this is I sort of had this feeling that although it’s important
to have these big grand scale policy discussions on the national stage both at the right and
the left end of the spectrum, that really we were paying insufficient attention to the
system that we currently have. Because if history is any indication, we might be looking
at a situation of more incremental change in our system, and the current system that
we have now has plenty of problems that we still need to solve. So, really what I’m focusing on here and
what I want to do is kind of start the conversation on how do we deal with this problem of the
uninsured population. The individual mandate was, of course, just one prong and a multi-prong
strategy under the Affordable Care Act to try to prompt people to sign up for health
insurance, to try to prompt enrollment. You know, we can talk about whether or not it
was more impactful versus the subsidies or versus other aspects of the Affordable Care
Act. But really, the goal of the system was to move to — it was to support this new
system where people were — where insurance companies were charging community rates and
were guaranteeing the issuance of policies. And so the individual mandate was trying to
prompt insurance uptake. We have this problem now where the mandate
has — really, the mandate penalty, if I’m being precise, has been repealed. And we can
talk about how much we think that’s going to increase the number of uninsured, but it’s
likely to increase the line at least somewhat. Even if you don’t think that the repeal
of the mandate penalty is going to be that impactful, we still have a problem with the
uninsured population. And I’ll put up some numbers in a minute, but even when the mandate
was enforced, the penalty was enforced, we still had upwards of 10 percent of the population
that was uninsured. So, how do we go about solving this problem?
Well, I think the first thing that we need to do is to spend some time on theory and
really understand what it is that is deterring people from signing up for health insurance.
Cost is certainly part of that story, but I don’t think that it’s the only part
of the story that’s worth discussing. And then once we understand what it is that is
keeping people from signing up for health insurance, then we can start talking about
some solutions. And really, what I’m doing here is just
engaging in a thought experiment. I want to define the universe of possibilities of ways
that we can work within the current confines of our laws, of our legal system that we have
right now under the Affordable Care Act, to try to prompt people to sign up for policies.
And I’m hoping that to the extent that I’ve missed major options, that the panelists will
raise those and that all of you will raise some options as well, with the goal of ultimately
getting towards the point where we might start experimenting with some of these possibilities. But I’m not going to promote any particular
one option over another. I really want to be honest about the pros and cons of the various
possibilities. And some of these are ideas that, you know, folks have been talking about
for a while, and some of these are more creative, more novel ideas. So, I’m interested to
hear everybody’s take on this. Okay. So, let’s talk about the uninsured.
And to a certain extent, this is a story that’s well-documented. So, in the years leading
up to the passage of the Affordable Care Act, you can see on the graph behind me that the
trend was that the number of uninsured or the percentage of uninsured folks in the population
was increasing. The highest rate happened in 2010, where you can see that over 46 million
people were uninsured. Fast-forward to the passage of the Affordable
Care Act, we see that the number does go down pretty dramatically. Again, we can talk about
whether it was the mandate that promoted that number to go down, whether it was Medicaid
expansion, whether it was the subsidies. It’s probably some combination of all of these
factors. But we can see that the number goes down to about 26.7 million people in the year
2016. And I don’t have the data up here yet, but we know that this line is now starting
to tick upwards again. So, in 2018, the trend line is moving slightly
upwards. And with the repealed individual mandate, it seems very likely that that number
of uninsured of the population is going to continue to go up. It’s really an order
of magnitude question, not a whether it will question. So, why is it that the trend line is going
to start to go up with the repeal of the individual mandate? Well, there are a couple of things
to keep in mind here. One is that really the Affordable Care Act, sort of the major purpose
of this legislation was to try to address the uninsured population. And the way that
it did that was it moved us from the system that was based on actuarial fairness that
we used to have — no. So, I should say, I’m putting to the side the employer market
and Medicare and Medicaid, and I’m focusing just on the private insurance market. So,
folks who didn’t have access to health insurance through any other mechanisms. So, prior to the Affordable Care Act, we had
a system that was based on actuarial fairness, where we were trying to match people’s rates
to their likely claims costs. So, if you are somebody who had a preexisting condition or
had a family history, that meant that you were likely to have high health care costs.
We were going to charge you more or we might — if you are an insurance company, you might
refuse to cover that population at all. While that was actually fair, we can all — I think
most of us would now say that that was morally unfair, that we had a lot of folks in the
population through no fault of their own didn’t have access to health care or health insurance. So, the Affordable Care Act, in trying to
change that, implemented these provisions called guaranteed issue. Everybody gets an
insurance policy; you can’t turn people down just because of a preexisting condition.
And also community rating. So, with certain exceptions, people were charged basically
the same amount regardless of their health history. We could — insurance companies
can charge you more based on age. They can charge you more based on smoking status and
where you live. But for the most part, the idea was a move towards a more community rating
system. Well, that gave us a problem. How are the
insurers supposed to pay now that we had a pool of people who had to be covered and we
couldn’t charge them more money? So, the drafters of the Affordable Care Act said,
“Well, the best way to approach this or to handle this situation is to draw healthier
people into the risk pools to even out the costs.” So, I have behind me the ACA’s
moral commitment to covering preexisting conditions and community rating meant that the healthier,
we’re really subsidizing the sicker. That was the idea behind the Affordable Care Act.
And the mandate was just one way that the drafters of the Affordable Care Act conceived
of. And really, it was based on an experiment in Massachusetts that came before that to
try to prompt healthier people to sign up for health insurance. There were other mechanisms as well and there
were — you know, a very popular provision of the law was allowing people to stay on
insurance until — their parents’ insurance until they turned 26. We subsidize both the
premiums and then also reduce cost sharing for people who made below a certain percentage
of the federal poverty level. But there were all these ways that the Affordable Care Act
prompted people to purchase insurance. So, now that that mandate, the penalty has been
repealed, there’s less of an incentive for healthy people to purchase insurance. I don’t
want to forget to mention that the subsidies are probably also a very important part of
this story. Okay. So, if you look at the graphic behind
me, the orange represents the sick people, and the blue represents the healthy people.
And this is just a way of depicting that post-implementation of the Affordable Care Act. In theory, our
risk pools were supposed to look something like this: sick people and unhealthy people
all mixed together on one risk pool. Some are more expensive; some are cheaper. If you
average it out, then the premiums were supposed to be palatable for most of the population.
Post-mandate world, and I guess, that really that should say “Post-repeal of the individual
mandate penalty.” The mandate, of course, still exists, but the penalty has been zeroed
out. And I’ll simply point out that without a
penalty for failure to purchase health insurance, some number of healthy people will choose
not to purchase insurance. Okay. There’s a lot of very smart economists who are doing
a lot of projections about an actuaries about, you know, how many people really won’t purchase
health insurance particularly given that the subsidies are still in place, but some number
of healthy people are going to leave these risk pools. So, what does that leave us? Well, it leaves
us with a risk pool that has more sick people in it than healthy people. And costs of that
risk pool, of course, are going to be higher relative to one that includes more cheaper,
healthy people in it. And with that, premiums are going to go up; people will fall out of
the insurance markets. I guess, I want to flag that, as Professor
Hyman stated, I’m not really here to debate the merits of the individual mandate. The
ship has sailed on that, at least for now. But whether or not you think that the mandate
was a good idea, this trend line of increasing numbers of uninsured is really what I want
to focus on. And I guess, just to emphasize again that even in a world with the mandate,
we still never solve this problem. There were still such a large number of people who didn’t
have health insurance. Okay. So, why should we be concerned about
the fact that there are large numbers of uninsured? And I’ll just be brief about this, but I
think that there are reasons both at the individual level and for the market that it’s bad to
have high numbers of uninsured in the population. So, at the individual level in many studies,
including a seminal one conducted by the Institute of Medicine, uninsured individuals have been
found to experience worse health outcomes than those who do have insurance. And of course,
the financial consequences for an individual who experiences high health costs and can’t
pay for them are also can be quite catastrophic. So, both the health outcome level and the
financial impact are concerns for the individuals, but then also the market. So, high rates of un-insurance are also problematic
there. When people show up in the emergency room and they can’t afford to pay for their
care, but EMTALA, for the most part, requires that the emergency room doctors treat them.
Well, that cost has to be absorbed somewhere, and it’s either going to be borne by people
who are insured or by the government. So, we have adverse spillover effects to consider.
And then there’s also the concern we already discussed about sicker risk pools and rising
premiums. Okay. So, high rates of un-insurance are bad
particularly if the uninsured cannot afford medical expenses. And before we talk about
possible solutions, I want to spend just a few minutes talking about why it is that people
aren’t signing up for health insurance. And number one on this list is always cost. So, I have just an example of a study up behind
me. And I say this is sort of the part of the talk where I’m going to draw a neoclassical
economic theory, but really what I want to emphasize is that, I think in every study
I’ve ever seen that ask people who are uninsured why they’re uninsured, why they have not
signed up for an insurance policy, the fact that cost is too high is number one on the
list. Okay. Now, I wish that these studies parsed
the fact that cost is too high down to a lower level because I think that that can mean practically
speaking different things for different people. So, those of you that engage in empirical
studies, you know, if you want to follow up on a study like this, this is really what
I want to know. I want to know what percentage of people who say cost is too high legitimately
cannot pay. Right? They would have to give up being able to pay for housing or being
able to pay for food in order to get health insurance. And housing and food is always
going to take precedence over having health insurance, and that’s why they don’t buy
a policy. But my guess is that a high percentage of people that say cost is too high really
mean the bottom part here, where I said for others, the cost is too high relative to the
risk of health expenses. So, this is a vastly oversimplified example.
But if you’re a person looking at the prospect of buying a health insurance policy and you
see that your premiums are going to cost you $6,000 a year, but you think you’re only
likely to have $500 a year in health care expenses, you might say to that study, “I
don’t have health insurance because cost is too high.” But really what you mean is
that you’ve engaged in a cost-benefit analysis where you’ve considered both what you consider
to be your risk and your risk profile, how risk-averse you are, and you’ve decided
that’s not worth it. Okay? A lot of times the analysis ends there. And
I think that that’s wrong. I think that we need to go further than just the question
of cost and look at some of the behavioral economic reasons that people don’t purchase
health insurance. Okay. The reason that I think cost is not
the entirety of the story — although I do think it is an important part of the story
— is that there are lots of people who are not signing up for health insurance even though
it would be basically free for them to get it either because they have very large subsidies
through the private market, perhaps they could get Medicaid and they’re choosing not to
sign up for it. There may be some objections to signing up for Medicaid based on reasoning
other than costs, but there seems to be good reason to at least believe that people are
not signing up for health insurance for reasons other than just the cost. And so I’ll run through these kind of quickly
because I want to make sure that there’s time to get to the discussion about the potential
solutions. But let me just start with this misperception of risk and optimism bias. So, one of the most robust findings in behavioral
economics is that people have difficulty evaluating probabilities. So, they underestimate high-likelihood
events, and they overestimate the prospect of low-likelihood events. And optimism bias
is just one type of misperception of risk. So, in the context of health care — this
probably won’t surprise too many people in the room, but particularly young people
— we have this term “young invincibles” that people on health policy circles often
used to describe this population, but they often feel that they’re unlikely to have
to incur high medical expenses even if that’s not a realistic assessment of the risk of
that possibility. Also, there’s a sense that people have this illusion of control.
If you are a healthy person now and you’re young and you eat healthy and your exercise
you think, “Well, I’m not somebody who’s ever going to incur health expenses,” because
you can control that. And of course, that’s only true to a degree. Right? There’s still,
you know, unfortunately, car accidents or somebody that gets hurt engaging in athletic
activity and all sorts of reasons that people can incur high health expenses even if they’re
young and healthy. Just some interesting numbers here. According
to the US Census, 55 percent of Americans without health insurance are under the age
of 35, and 72 percent are under the age of 45. So, many of these people likely think
that by paying premiums, they’re essentially throwing away their money because they’re
not going to have to use their health insurance. Hyperbolic discounting and regret bias is
second on the slide behind me. And so here I’m referring to the fact that people tend
to prefer immediate gratification even at the expense of longer-run well-being. So,
it’s really hard to pay out hard-earned money now for the possibility that down the
road, you’re going to get a benefit from the health insurance company. There’s just
a lot of uncertainty there. People put too much weight on class today and too little
weight on future benefits. Framing effects — I’m going to talk about
when I make the suggestion in a few minutes about generosity as a better way to frame
the sale of health insurance. But right now, most health insurance is being sold as a rational
economic decision. And of course, we know that a good percentage of young healthy people
would not be making a rational economic decision to purchase health insurance despite the risk
because they are explicitly subsidizing the cost of sicker and more expensive individuals.
It isn’t a good deal for them. So, the framing effects might really matter there. Status quo bias. This is the idea that people
tend to stick with the default or tend to stick with what they already have. Of course,
the default is not to have health insurance. You have to actually go through a lot of work,
wade through a lot of options in order to purchase a health insurance policy. So, there’s
a certain inertia to just staying with what you have. And then finally, this idea of choice overload
and complexity. So, here there’s been lots of studies that have shown that while we may
have assume that more choices are better, you reach a point where people have too many
choices and they choose not to engage in the decision-making exercise at all because they’re
simply overwhelmed by the complexity. And I think that that can be a real challenge
in the context of buying health insurance, particularly where literacy about how health
plans are priced and people’s understanding about the deductibles and copays and coinsurance
is not necessarily ideal. Okay. So, the question is: If both too high
of costs and also this list of really cognitive biases is impacting people’s decision not
to buy health insurance, well, what can be done about that? So, here I have a menu. I’m
going to just highlight four possible solutions today. And again, I’m hoping that the panel
might have other ideas that they’re going to suggest as well. But let me start first with this idea of low
introductory rates with long-term policies and exit penalties. Okay. So, here I’m really
co-opting a commercial practice that has been used with a lot of success in other contexts
for poor reasons with bad results, right? So, of course, I’m thinking here now the
subprime mortgage crisis. Mortgage companies sold people mortgages that offered this really
appealing low introductory rate that later ballooned. And because — precisely because
of the behavioral biases that we just talked about, people purchase these mortgages even
though in that context they shouldn’t have, and it led to very poor results for the market.
Okay. In this context, though — but I guess the
thing to flag is that this commercial practice was successful. It got people to buy these
policies. And so I wonder if there’s a way to do something similar for health insurance
where the result is something that we seek, that we want. We want people to enroll in
health insurance. So, what if we gave them a discount to prompt enrollments, offer them
sort of a low-introductory rate, and then gave a longer-term policy that had a limited
exit, right? Okay. So, I’ve listed here some of the reasons
why I think that this might work. So, I think that it addresses some of the short-term affordability
concerns, particularly for younger people who, you know, are looking at these premium
rates and are thinking that they’re too high. And it sort of takes advantage of this
difficulty that people have with understanding the fact that these prices are going to go
up later and what impact that might have. I think that these rates would clearly need
to be disclosed. We would need to have a schedule of rates so that people are not experiencing
rate increases that they weren’t informed of. So, it takes advantage also of these time-inconsistent
preferences. And so this last bullet under why it might
work, I say, gives insurers the incentive to focus on long-term health. So, I think
this is actually really interesting aspects of a long-term health insurance plan. So right
now, of course, the norm is for plans to only last for a year. And there’s relatively
high churn rates in the health insurance industry. People move from insurer to insurer. If you
consider the employer market or almost half of the population gets their health insurance,
you move jobs, you get a different insurance company. And it gives us this sort of weird
incentive that health insurers — and I should note that private health insurers also understand
that when you reach the age of 65, you’re going to be moving on to Medicare. So, there’s
this weird incentive to focus on relatively short-term health and choosing what to cover
as a medically necessary expense. Health insurance companies don’t necessarily have the incentive
to look at that particular insured 10 years down the road and determine if that person
is healthier 10 years down the road. They are really focused very much on the policy
time frame. Now, of course, it’s not just the one year
because many people will have policies for longer than that, but there is this weird
incentive to focus on short-term health. And if you had longer-term policies that would
change that incentive, so, in a sense, it will align the incentives of both the insured
and the insurer because the insured wants to be healthier over the course of a longer-term
policy, and the insurer wants the insured to have lower health care expenses. So, I
think that’s sort of an interesting sort of side benefit of that. Okay. Some concerns, some reasons that I think
that this may not work. And actually, I was talking to Shari Westerfield about this when
we were getting ready for this panel. And she said to me — I’m sure she’s going
to talk about this in her remarks — that from an insurance company’s perspective
and the perspective of an actuary, that they view the private market as sort of a transitional
market. People are not intending to stay in this private market for the long term. They’re
hoping to return to employer-sponsored insurance, or, you know, maybe they’ll be moving on
to Medicare. And so one possibility is — is that people
won’t necessarily want long-term policies because they’re viewing their place in this
private market as relatively short-lived. I think that’s probably true to a degree,
but I’m also wondering about the increasing number of workers who are participating in
the gig economy, who are private contractors who are looking at the prospects of never
getting insurance through work, who know they’re going to be in this private market for the
longer term. So, I think that that’s at least something to look into. Questions about whether or not insurers can
price policies accurately over a longer term — and I think this is a big one, a big area
of concern. One of the reasons for one-year insurance policies now is that there’s so
much volatility in pricing and in health care, and insurance companies don’t necessarily
know from year to year if they’re going to see big spikes because some expensive new
technology has come out that they have to cover or some expensive new drug has come
out that they have to cover. And so I think there’s a concern that if insurance companies
have to price something over a longer term, are they going to cautiously or conservatively
price it higher just in case they have high medical expenses? And so I think that that’s
something that, you know, people who are working for the insurance companies will really have
to look at very closely, the extent to which they can accurately predict costs. And maybe
10 years is just too long. Maybe three years is a better length or even five years to look
at for that. Reduced competition is potentially a problem.
So, if insureds have a policy for 10 years and have limited right of exits and can’t
go elsewhere because they’re unhappy after year one, in that something that could be
problematic. Again, there, I think the alignment of incentives might help mitigate that effect
a little bit that the insurance companies care about healthier insureds over the longer
period because it also reduces their costs, but that’s certainly a possible concern. And then I just wanted to flag that although
I’m pitching these as private law responses that it could be done now, this one does have
some legal changes that would need to be made. Right now, the Affordable Care Act only allows
insurers to charge older people three times as much as younger people. So, if you wanted
to offer younger people really significant discount, you could only do it up to three
times of older people, so that might need to be changed. And I’ve looked a lot to
see if there are any laws about employer-sponsored insurance having to be offered as one-year
policies. I haven’t found any. I’d be curious if other folks are aware. But in the
private market, under the Affordable Care Act, there are some laws about the open enrollment
periods that would require policies to be one year, although I think probably the norm
about open enrollment and people’s expectations about one-year insurance policies might be
a bigger hurdle to jump over than the legal changes here. Okay. So, another possible solution. So, this
I’m titling “A Return of Premium Policy.” And I’m drawing on some earlier work from
Tom Baker and Peter Siegelman here that really were all collectively drawing on something
that’s sold in the life insurance context, the term life insurance context. And what
generally happens there is that you might be interested in buying a term life insurance
policy for 15 years or 30 years, but you’re a relatively young person. You don’t think
it’s likely that you’re going to die in the next 15 years or 30 years. You are worried
about whether it makes sense to even get this insurance policy at all because you think
you’re just throwing away the premiums; you get nothing at the end if you’re still
alive at the end of 15 or 30 years. So, in the insurance context, they came up with this
product where they do charge you a percentage high — they do charge you higher premiums
over the course of your policy, you know, between maybe 15 percent and 30 percent higher
premiums. But then at the end of the policy, if you’re still alive, they return those
premiums to you. So, it basically works like a loan to the insurance company. The insurance
company is investing those premiums over the course of the policy. So, I wonder if something similar might be
able to be done in health insurance as a way to address the concern that younger people
think that they’re paying premiums that they’re basically throwing away. And it
couldn’t work exactly the same way as in life insurance because you wouldn’t want
to deter people from engaging in preventive health care that’s going to make them healthier
over the long run, over the long term. And you couldn’t return 100 percent of the premiums
because you would have to account for those costs. And of course, there will be some young
healthy people that you bring into the risk pool who then will have high health care expenses.
So, the numbers on this sort of need to work out. And I will defer to the actuaries and
the economist amongst us to tell me if this is really possible. But the idea is that you
would promise to return some percentage of the premium to people who do not use health
care expenses outside of the preventative health care contexts at the end of their policy
term. Okay. So, what are the possible concerns here?
One is that this does sort of run counter to the fact that people are concerned about
costs in the short term because you do have to charge higher premiums or I suppose just
return a smaller percentage of the premium at the end of the policy in order to make
the math work. Also, there’s a question of what percentage to return and still cover
the high costs of some, which I’ve already mentioned. And then, I guess, finally, the
other concern is that, to the extent I told you earlier that one problem with our current
system is that it’s too complicated and that people don’t necessarily understand
all the options and that by making it too complicated, people opt out, well, this is
sort of a complicated solution. Right? People have to understand what it is that’s being
offered to them by the insurance company. And I’m creating more options here. So,
something to keep in mind. So, this one I’m particularly excited about.
So, I’m titling this “Generosity Framing.” And really, what got me thinking about this
was I was looking at the national polls, the numbers about the percentage of people who
now supports these guaranteed issue and community rating provisions in the Affordable Care Act,
these protections against discriminating as people that have preexisting conditions. The
numbers are extraordinarily high. Vast majority of the population supports these provisions
that protect people and say that we can’t refuse to issue them an insurance policy or
charge them more. Okay, which is great. I think that that’s important. But that has
to be paid for somehow. Either it’s paid for in increased taxes, or it’s paid for
by healthy people buying insurance policies the way the Affordable Care Act was designed
to work so that we don’t just have increasingly sicker more expense risk pools to cover. So, I thought, “What if we were just more
honest about that and the selling of insurance policies that if you are a young, healthy
person and this is a generous thing to do, to buy an insurance policy?” Let’s sort
of trade on that desire to be altruistic to do something good. And this is a kind of a
big trend, particularly in commercial companies that are pitching their products to millennials
now. And so I put a couple of examples up on the
slide behind me: TOMS shoes and Bombas socks. Although this could be a very long list of
products, but those are both products where they’re inflating the price a little bit.
You’re paying more for your TOMS shoes; you’re paying more for your Bombas socks
than you would be if they just sold the product outright, but they’re promising that because
you’re paying a little bit more, they’re donating a pair of shoes to somebody in need.
They’re donating a pair of socks to somebody in need. And these companies, at least to
this point, have been quite successful in trading on this desire to be generous or to
be altruistic. So, it’s possible that we could do something
similar to this in health insurance. We could just say to people, “Listen, maybe it’s
not a rational economic decision to buy health insurance. It’s always good to be protected.
You never know if you’re going to be somebody who gets into an accident and has very high
health expenses, and it’s certainly a good thing to have health insurance. But yeah,
you’re paying a little bit more than you would be if we weren’t also saying that
insurance companies can’t charge sicker people more money.” Concerns about this. Okay. So, certainly,
there are some people who are not going to be influenced by the generosity or altruistic
frame, although I think there are some that will. But I think the two bigger concerns
are it’s sort of different to say that you’re paying a little more for a pair of shoes than
it is to say you’re paying for a whole year of premiums, different orders of magnitude.
So, when I say generosity threshold, that’s really what I’m referring to there. And then my other concern is just the general
distrust of insurers. You hear lots of candidates for president in 2020 talking about both the
big bad pharmaceutical companies and the big bad health insurers. And I think that there
is a certain percentage of the population that wouldn’t necessarily believe that the
health insurers are going to be doing something generous and altruistic — although perhaps
this is a good opportunity for a new market entrant who would come in and sort of market
themselves as an alternative to those companies who’s being honest about the fact that this
is the way that their health insurance is priced, that they need healthy people to balance
out the costs of sicker people. Okay. One last possibility. And again, this
is not a new one. I think everybody’s heard or discussed with others the idea that we
could auto-enroll people in health insurance. So, this trades on the status quo bias, which
says that people tend to stick with the default. So, if there’s a certain inertia that is
keeping people from signing up for health insurance because the status quo is not to
have it, well, we could change that default. We could take people who are uninsured, and
we could automatically enroll them in a policy with the right to opt out, of course. There are some things in the way of this auto-enrollment.
And I should note, by the way, that there is some auto-enrollment going on already;
particularly, in the individual market, there’s auto-reenrollment. So, if you have signed
up for a policy through the private exchanges, you are automatically reenrolled in that policy
in the next year with the rights to opt out, but we’re not automatically enrolling people
on the first instance. And I think there’s a couple of hurdles
to this. One is that it’s just identifying the people to enroll in the policies in the
first place. There are certain decision points perhaps that we could use; there are certain
data from the tax system that we could use to try to identify which people to enroll
in policies. But a couple of other concerns in addition
to the data problem is ability to pay. So, if we enroll people, automatically enroll
people in a policy, and they don’t have the ability to pay the premiums, what happens?
They’re basically going to immediately lapse from that policy. Although, again, you know,
this is sort of a, you know, perfect versus a good situation, right? If there are some
people that were automatically enrolling who aren’t going to lapse, who are going to
pay the premiums, then maybe we’ve improved upon the current situation even if there’s
going to be a certain percentage of people who lapse. And finally, just, you know, the possibility
that this is too paternalistic of a solution. You know, we’re sort of forcing people into
these policies, although I guess I’ll just emphasize that this does give people the right
to opt out. Okay. I think my time is up. I’ll just note
that I’ve started this as a thought experiment. I want to start a conversation. I hope that
there’ll be some experimentation. I hope that we might try implementing some of these
solutions. And with that, I will turn it over back to Professor Hyman. David Hyman: All right. So, we have four distinguished
panelists to comment on it, and I think we’re going to try and reshuffle the seats up here
so that at the end people can sit as a panel and discuss this more broadly. But Tom, you
want me to introduce everybody now, and we’ll get started? Or do you want to take a short
break? Thomas P. Miller: [inaudible] exit. David Hyman: Everyone will leave. All right.
You’re — Thomas P. Miller: Movement on the chairs. David Hyman: All right. So, I will encourage
whoever’s responsible for the chairs to start doing that, and in the meantime, I’ll
start introducing our four panelists. So, first up, is going to be Chris Robertson,
who is a professor at the University of Arizona. That’s the one in Tucson, not the one in
Tempe. Much nicer in Tucson, by the way. He’s the associate dean for research and innovation
there. He’s also affiliated with the Petrie-Flom Center for Health Law, Policy, Biotechnology,
and Bioethics at some school in Boston, which is also where he went to law school. He also
has a PhD in philosophy from Wash U, and he was born in Illinois. So, we’re going to
cover the Illinois connections for everyone here, including me as it happens. Then next up, after Chris will be Tony LoSasso,
who is a professor and Driehaus Fellow at DePaul University, the same institution as
Professor Epstein. Until recently, he was a professor at the University of Illinois.
He’s an economics professor at DePaul University. In fact, when I got the announcement, my reaction
was Tom made a mistake because I remember Tony being at the U of I, where I was also
a professor — once again, Illinois. And he currently lives in Illinois. Third up is Shari Westerfield, who’s senior
vice president and chief actuary at Excellus BlueCross BlueShield, where she oversees the
pricing of health insurance products. She lives in Chicago and has been there for quite
some time as well. And then our fourth speaker is Tom Miller,
who is a scholar here at the American Enterprise Institute, attended some school in North Carolina,
and as far as I know, has no connections whatsoever with Illinois. But I’m — all right. I
— Thomas P. Miller: Corrected. David Hyman: I stand corrected. So, you can
use some of your 10 minutes to talk about that particular issue. So, each of the panelists
will offer their perspective on this, and then we’ll have a little bit of back and
forth, and then we’ll go to the audience for questions, comments, reactions. When we
do that, I want to encourage — and I’ll just say this now, and I’m going to say
it again later because one of the things I’ve learned as a professor is repetition is very
important in getting your message across. So, questions or comments, not speeches, from
the audience. And if you want to argue about the desirability of Medicare for All or anything
like that, this is really not the venue for that. We’d be happy to talk with you separately
about that, but for now, I’d ask you to focus on Professor Epstein’s very interesting
paper. So, with that, let me turn it over to Chris. Christopher Robertson: Thank you. I’m really
honored to be a part of this conversation. And, you know, Wendy started out her — or
ended her talk saying that we need to do some experimentation on these issues. And sure
enough, Wendy has sort of performed a classic Tom Sawyer move and persuaded me to join her
in doing some of that experimentation. So, I’ll be sharing with you some research that’s
sort of not even hot off the presses — is hot from the field. We were literally collecting
this data last week and trying to do some quick analyses. We have something to share
with you today. So, on that note, we really wanted to move
the ball one small step forward in talking about whether these new reforms can be put
into practice, what they would even look like if they were described to consumers, how we
wanted to get some preliminary sense of how consumers might respond to these sorts of
ideas. And if we do see a positive response, would like to at least get some sense of the
scale because some of these are quite complicated and expensive, and we want to have a sense
of whether they’re really a substitute to the individual mandate. And so that sense
of a scaling effect is the direction we’re going in this research. So, there’s a lot on this slide, and I have
a few minutes, but we did a blinded between subjects randomized, vignette-based survey
experiment. And a vignette is a — vignette survey experiment is a method of research
where you recruit people and rather than just asking their opinion on some issue, you ask
them to put themselves in a rather extensive situation that you describe in some depth
and then ask what would you do in that situation. And here, the situation was you’re an uninsured
person and everyone who recruited for the study was actually uninsured. And we asked
them, you know, “Imagine you’re presented with this health insurance policy.” And
we described in some detail, including the cost-sharing profile and whether your doctors
are in network and provide a premium price. And then we say, “Would you buy that insurance
policy?” And we measured that on what’s called a Likert scale from one to seven, where
seven is extremely likely to buy. And so we screened these respondents. We had 551 respondents from an online surveying
service provided by a company called Dynata. And we had them also explain their decisions
until we screened out the people that didn’t seem engaged at all or who went to a survey
ridiculously fast. And then we manipulated the experiment in five different ways. Again,
it was blinded, so we didn’t emphasize to the respondents which kind of conditions they
were in. We just described the insurance plan. The base case was, as I already described,
a plan with, I think, a $2,000 deductible and a maximum cost exposure. And we adjusted
the premium based on nationwide average premiums — that turns out that it was really complicated
to put it even in practice because premiums are adjusted for family size, for income,
for age, but we tried to give a relatively realistic view of a premium. And then we tried four manipulations on top
of that base case. One was the return of premiums mechanism that Wendy described. And again,
here we’re just taking those initial steps of putting into practice. We assume that the
premium would be 20 percent higher for everyone. But if you went through a whole year without
any medical expenses other than preventative care, you would get 80 percent of that back. In another version of the case, we tried this
long-term premium plan. Here we specified they’d be a decade long. Those teaser rates
Wendy described, do we put into practice has a half premium for the first three years?
It went to a normal size premium for the middle three years. And in the last four years, it
went to double premiums. So, it had this sort of teaser rate feature. And we imposed a cancellation
penalty of one year of normal premiums. We also tested this generosity frame. We created
a little logo that says, “One healthy person equals one sick person,” and explained that
this is, in a paragraph, this is your way of doing your part to make sure that we can
cover people that have preexisting conditions. And finally, we wanted to — as a sense of
scale, we want a sense of how this compared to just giving people money, like putting
money on the table. And so we implemented that with a $500 annual subsidy. We chose
that price point because it took our lowest-income groups premiums from $48 a month to $8 a month
for this full health insurance plan. As Wendy said, it makes it essentially free for them. Okay. So, what we’re all looking for then
as the results? What happened? And here’s our main findings by experimental condition.
We found about half the people in our sample said they would be likely to buy the insurance
plan they were presented. But whether that went up or down did depend somewhat on the
experimental condition. You can see these little thread lines above and below. Those
are 95 percent confidence intervals. And so where they overlap in this small initial study,
that means we can’t rule out the possibility due to chance. It’s essentially a margin
of error. We found that the long-term plans were not
particularly attractive to people, nor did the subsidies seem to make any difference.
But the return on premium and the generosity frames both seem to be driving respondents
to be slightly more likely to purchase the plan, 8 or 10 percent additional people on
the margin. We then sought to break this down by income,
by age, by health status. And I think this income slide is probably the most interesting.
The group in the left is the base case, which you’ll notice there is the relatively wealthier
people are less likely to buy the health insurance. Why would that be? It’s because, as I said,
we implemented the subsidies that we see in the Affordable Care Act. So, those people
are getting relatively poor deals compared to the people in the lower-income bands. But
you’ll notice the generosity frame essentially corrects that, and you can see that right
here that the gray and yellow bars come up so that the wealthier people seem to be now
buying insurance at about the same rate as the poor people, even though it’s not subsidized
at all for the wealthiest individuals and only somewhat for those below. So, that’s the, I think, most interesting
story on this slide. For age, we see different responses, potentially, at different price
points. We see the older people being the least interested, for example, in the long-term
plans. But not a lot of action here, I think. But another interesting finding with regard
to health, we don’t see huge evidence on this method of adverse selection. Oddly, you
should expect the sickest people flocking to the insurance because they have the private
information that the insurer doesn’t have. They should be exploiting the fact that they’re
going to be a bigger user. We’re actually not seeing that in the sample. That’s not
a worry for our research method that we’re not seeing it, but on the other hand, it suggests
that insurance purchases are not purely rational decisions. People are deciding with all sorts
of heuristics and biases. So, I think our big findings to the extent
we can boil anything down at this point is that the implicit subsidies are not working
in our sample the way we might hope. We think that one hypothesis is that consumers may
actually see a price value link. There’s a lot of research that people infer the quality
of a product by the price on the product. So, if I tell you that you’re taking a very
expensive drug, you will tend to think the drug is highly efficacious. That might be
what’s happening here when you bake subsidies into a premium price. People are like, “Wow,
I’m not going to get much out of this insurance plan. I don’t understand. I can’t see
what they’re going to call medical necessity. I can’t actually evaluate whether my future
doctors will be in the plan. I don’t understand even what a deductible or a copay is.” So,
they might use a very simple heuristic there. We don’t see a lot of excitement in long-term
plans. You know, people if you ask, “What’s your favorite thing about your credit card?
Do they lock you into a multiyear contract?” No. That’s probably not what excites people
about their cell phone contracts or other things as well. We’re not seeing that excitement
here either. Again, we can go back to this and qualitative and maybe do some focus groups
and review people’s explanations to see why. The return of premium policy seems really
interesting. I think it’s something that we’re excited about looking at further.
Of course, the devil is in the details and figuring out how much of the premium is actually
going to get returned in a sustainable way. And the last finding that’s pretty exciting
I think is actually a generosity frame because it is relatively simple. It’s a few words
on piece of paper saying that “Hey, here’s a different reason to think about buying insurance.”
And like we saw, there’s maybe a 10 percent shift on likelihood. That’s not enough to
achieve anywhere near universal health insurance coverage, but it’s kind of interesting that
it’s able to shift some people towards buying. So, in my last minute, I’ll mention we have
a range of limitations for this sort of study we can talk about in greater detail. One limitation
is we haven’t even had full time to analyze the data. We haven’t done the multivariate
regressions and things that would be really interesting to tease apart the different effects.
You know, we’re really viewing this as a pilot study, something that we’d like to
go back with a larger budget and a larger sample and a second round of fleshing out
what these proposals look like. But it’s enough. It’s the kind of thing that can
address where to spend our time and resources next. So, with that, I want to close and thank you,
and also, want to plug my book that’s coming out in December on the related topic of cost
exposure and health insurance. One thing I did see in going through our data already
is that a lot of people said, “I don’t want to buy this plan because I couldn’t
afford the $2,000 deductible. This isn’t real health insurance for me.” So, that’s
the sort of question that I explore in this book called “Expose,” which is coming
out this December. Thank you. Anthony LoSasso: Well, thank you. I’m Tony
LoSasso. I’m also at DePaul University, and, you know, we shouldn’t — Wendy and
I shouldn’t have to travel to DC in order to see each other because she’s, like, literally
in the building next door. But since we’re here, good to see Wendy and all of you. I
mean, in general, you know, you typically invite an economist to a party when you want
somebody to pee into the punch bowl, in a metaphorical sense there. And so I actually I want to start by saying
I think Wendy’s paper does a really nice job, a terrific job really, of presenting
the issues on this really important topic. I think the paper itself is extremely useful,
really interesting to read. I think it will probably be on my syllabus for an upcoming
health policy class that I’m planning to teach. And then, you know, as an economist,
I like that she takes the economics behind this issue seriously. But I do want to make a few points, though,
just along those lines just around kind of the economics. Because I think that’s where,
I guess, there’s maybe some room for improvement or clarification. You know, the first issue
really is just around the nature of insurance. And we need reminders. Like David said, I
mean, repetition is your friend here, especially on this issue that insurance only works when
there’s risk present. Okay. Risk means that, you know, that they
are unknowns and they are symmetrically unknown by both parties to the transaction. We have
long history, an old literature looking at the market for lemons — Rothschild, Stiglitz,
Nobel Prizes have been given about how markets break down when there’s asymmetry of information.
And so, you know — and of course, it’s always easy to predict things when they’ve
already happened. At least, you know, I can appreciate that because those are generally
but I’d said easier also but there’s no risk when a bad outcome has already happened. And I think, you know, people seem to get
this, I think, for auto and home and life insurance. They get that you can’t buy a
life insurance policy after you die. There’s at least one — yeah, more than one reason
for that too, but being dead being central. But nevertheless, auto insurance — you can’t
buy — people get you can’t buy an auto-insurance policy to cover the accident that happened
to you yesterday. Okay. Homeowners, you get the idea. So, that said, you know, I am not surprised
— and Wendy pointed this out — that people are very quick and nearly unanimous in their
support of covering people with preexisting conditions. Because they’re not heartless
economists mostly. All right. And it’s a compassionate reaction, and I can at least
at an abstract level understand that as a heartless economist. So, it’s — I do think, though, that if
the question around that was framed differently — this is my little plug here. I’ve never
tried this, but it would probably be a lot less popular if the phrasing was different.
Are you — although, it’s testable hypothesis. Are you willing to pay $2,000 more because
someone chose not to have a four-year insurance policy because someone chose not to have insurance
and then got sick? I think it’d be less popular. I’m just going to make a directional
prediction there. I don’t know how much less popular, but less popular. It may still
be the moral thing to do. And Wendy dropped the M word. I mean, she should have, actually,
a trigger warning for economists in the room when the word “moral” popped out, unless
you’re talking about moral hazard, which is a very significant issue in health insurance,
but that’s for another time. So, I really think that the bigger issue is
how she actually frames it here. She frames it as, “For the ACA to work, healthy people
must enroll.” Make sense. Okay. But not quite. It’s slightly more nuanced than that.
It works if people with unrealized health problems enroll, some of whom will get sick,
some of whom won’t get sick. When you include — so, the fatal flaw, I think, in the law
from a policy design standpoint is that you’re in effect rewarding this irresponsible behavior,
okay, that is — you know, there’s no penalty to wait to get sick until you get your policy.
And so the irresponsibility begets further irresponsibility because you don’t want
to be the chump who gets into the market and buys a policy subsidizing the people who are
being irresponsible. So, that might be a little harsh, but I don’t have a lot of time. And I do think then that, you know, no amount
of trickery — and not that her solutions are trickery — but I will say I’ll just
add this, you know, in the paper — she didn’t say this in her talk, but in the paper she
references pricing strategies used by the cable TV industry. Well, I mean, there are
various few industries that are more hated than health insurance; cable TV is one of
them. So, you don’t want to refer — you don’t want to go there, I think. So, in
terms of referencing, you know, winning strategies to get more customers and win more friends. But I don’t think that any amount of adjustments
to framing is going to fundamentally push this rock up that hill because there is this
fundamental problem of people without insurable health care needs being thrust into a health
insurance mark. Those are two — that’s a fundamental incompatibility, because when
the risk has been revealed, it’s not insurable anymore. Just like the car crash that happened
to you yesterday, it’s not insurable. Just like the house that burned down yesterday,
sorry, not insurable. And people get it there. For health care, you know, all right. We have
hearts. I get it. But we can’t let our soft hearts infect ours and become soft heads as
we go along with this process. So, I mean, I think there’s a lot of — I
think there’s a lot of interesting — and again, there is — well, there is — it’s
not all bad news. I’ve got a minute or two left here. It’s not all bad news because
— and this is a public service announcement. Not a positive one really, but public — a
PSA, nonetheless, that we can at least take some comfort in the fact that health insurance
isn’t going to make you healthier any more than auto insurance is going to make you a
better driver or life insurance is going to make you live longer. It doesn’t work that
way. And if you need experimental evidence, we’ve
got it. Experiments have been conducted. The RAND health insurance experiment found that
where they randomize people to different types of health insurance plans all the way from
a super-high deductible effectively no insurance plan to first-dollar coverage plan. And they
found that — they found, like, a 0.1 Snellen line change in your vision acuity. That’s
a handful of people who got glasses. Excellent. That’s 0.1 of a line, you know, on those
eye charts better. And that was it. And it wasn’t through lack of trying because those
folks worked hard on that and looked for everything. More recently if you say, “Well, that was
the ’70s. That was — there was disco music and bell-bottom trousers back then, so let’s
— what about more recent evidence?” Oregon Health Insurance experiment. The best and
brightest from Harvard and MIT and associated places use an experimental lottery system
that happened in the Oregon Medicaid system. And the only thing they found was that people
were less depressed. Well, they were less depressed because they didn’t have the cost
of health care to worry about. And that actually makes eye bill less depressed. If I got free
health insurance and I didn’t have to pay any copayments, that — well, I’d still
be an economist, so I’d probably still be depressed about things, but, nevertheless,
that’s kind of as it should be because, again, insurance is fundamentally a financial
contract. It’s not something that’s going to make you healthy. It will prove — it
will indemnify you against threats of catastrophic health care spending, but that’s it. And
that’s good. Okay. But let’s not imbue it with too much more than that because that’s
what it’s fundamental purposes. Okay. So, I’m going to — I’m out of
time. So, I just want to say I really am glad to be here. This has been really, again, a
great paper. I’ve enjoyed reading it. I look forward to further interaction with you
all and with Wendy. Thanks very much. Shari Westerfield: Hi. So, I’m Shari Westerfield,
as previously announced, who’s the chief actuary at Excellus BlueCross BlueShield in
upstate New York, but I also live in Chicago. So, there’s all these professors here, and
it’s like, okay, so why would anybody bring an actuary in here? So, I guess I’m here
to sort of bring down a little bit more in the what happens in the actual insurance markets
and what do we see from our perspective. And I do agree a lot with Wendy’s paper
on, again, that the majority of the uninsured today are generally younger adults. And I
do believe that cost is the real reason. There might be some of those other, you know, inertia
bias, and the complexity could be factoring in, but by and large, you know, I do see the
cost is the main driver. And one of the ways we see that is coverage take-up has been going
down or uninsured rates have been going up, as Wendy mentioned. And there’s definitely as the ACA went into
place, and the rates have had to been sort of adjusted year to year to find out where
does the actual rate meet the market average because when you’re pricing on a community
rate basis, you kind of have to price for the pool that is covered. Back again, that
if we can get healthier group of people covered that would help bring — maybe not bring
prices down because there’s other drivers pushing it up, obviously, the actual cost
of care and new drugs and things, but it will certainly take pressure off of the increases
and in the premiums. So, as we saw over the last several years,
the prices become more aligned with the actual population being covered. We’ve seen the
actual lapses increase over the years. So, by and large, I do believe cost is the main
driver. And I also agree with Wendy that it’s probably a mix of people who truly cannot
afford it and those who just don’t see the value proposition in spending what could be
and likely will be several hundred dollars a month for something that they don’t think
they’ll get anything back from. So, I do believe it’s both of those. She mentioned that we talked a little bit
previously. And, you know, again, I explained that today, the individual market is really
sort of a transitional market, or you might even refer to a market of last resort. People
if they’re eligible for Medicare or Medicaid or employer coverage, they’re obviously
going to take those first before they go to the individual market. She did mentioned though
too that that could be changing a little bit much with the changing employment dynamics,
where more and more of these younger people are being independent contractors and the
individual market may be really their only source of potential coverage. So, with that said, I’m going to talk a
little bit about some of her proposed options in the paper and give some of my thoughts
on them. The long-term policies, again, I think, because of the short-term nature of
the market, that was one of probably the biggest hurdles, unless that really does change in
the near future. The other thing I see that from a health plan perspective is that she
also said that if people become — to avoid sort of the real penalties of people getting
coverage elsewhere, whether they get employment or other coverage, that they could basically
be exempt from the exit penalty, but that seems like then all that benefit is lost.
And I’m thinking that’s probably going to happen a lot over certainly a 10-year period,
you know, maybe five or three years, but she also discussed it could be different. But
in the really long term, I’m guessing that’s going to override most of the initial benefit. Conceptually, though, I mean, I think the
idea is that having lower rates for younger people to attract them in. Well, again, as
an actuary, first thing I would say, well, that’s the same as having a steeper age
reading curve. So, instead of having three to one rating, why not go to four to one?
Again, it does take a lot of change, but four to one actually is closer to the actual underlying
costs on an age basis, not counting specifically health status, which you still would not rate
for, but what we consider modified community rating world where you can rate somewhat on
age. If you had a little steeper of an age curve, so you bring in — you basically would
essentially achieve the same thing. You would have up lower rates for younger people earlier,
and those rates would increase a little bit more every year until you got to the age 64
rate, which is the max before people become Medicare eligible. So, it seems like you’d
almost achieve the same thing. It might be actually a simpler option. The return of premium idea, again, it’s
something that is used today but in different contexts — life insurance where the claim
rates, obviously, are much lower than health insurance and much easier to do. Longer term,
oftentimes, that money is then invested, and it’s the investment income that then supports
the return of the premium a lot — much harder to do in health insurance. Again, you’re
not going to probably have as long of a term first of all, and, again, you don’t want
to totally disincentivize any claims. You want people to get their preventive whatever
else they really need. So, the devil is definitely in the details,
how much you would return. And the example of a 20 percent surcharge for 80 percent return,
I can — without having to do any of the numbers, I’ll pretty much tell you that
that’s not really going to work. We have to be a much smaller return and probably a
higher surcharge, probably more in the 30 percent to 40 percent and you probably could
return 40 percent, 50 percent maybe. I mean, obviously, there’s a lot of numbers work
that has to go behind that, but — in some of the other types of insurance today that
do such types of return of premium, I do know that their loads can be anywhere from 60 to
100 percent and a 20-year policy with no claims before it’s returned. So, just to give you
a comparable sense of what goes on in the market today. The generosity framing one, I’m not even
going to touch. I am an actuary. I am not — no idea on that one. But I will go to auto-enrollment. This is
something, again, that comes up a lot. It’s a great concept. I actually liked the idea
because I do think part of what’s holding some people back is really knowing what is
out there, what their options are, what the subsidies might bring them. And so a way of
getting that to them in a way that makes it easier for them might help. But I still struggle
with the “How do you identify people and then how do you get them to actually pay?”
So, I think there’s still some practical hurdles, but I think from a concept, being
able to help people truly navigate the market and understand their options I think could
be beneficial. A couple items that she did mentioned that,
again, I’m not necessarily new, but I think just — what I truly think, again, is getting
to the cost to me is still the biggest barrier. There are some complexity issues, I agree. And I’ll just throw out that in New York
State, we have standardized plans to make it simple for consumers to just pick the standardized
plan. Almost nobody buys the standardized plan, so it’s just an example. But everybody
has to offer them, and nobody buys them. So, I don’t know if that tells you anything;
it’s just an example. But one thing I do think could work is enhancing
the tax credits. They are structured up to a 400 percent of the federal poverty level,
but if you really look at how they work, being at 300 or higher, you really aren’t getting
much of a value. And for people, 300 is only about $36,000 a year. That’s not much to
be buying individual market coverage with. So, I think if you can truly and help out
a little bit more of those people in those middle-income ranges, I think targeting the
affordability would really be helpful there. And I think — and they go up to 400 percent.
Again, though, there’s not much of a benefit at 400. Even that’s under $50,000 a year,
still not a level of income that maybe could really support health insurance without giving
up is when you were saying some of the sort of daily necessities. But it also would help
target that value proposition. Some of these higher-income individuals may be able to afford
it, but, again, don’t see the value in affording it, in buying it, and so maybe a little more
of a subsidy range could help in that aspect. Obviously, that does require law changes and
everything too, but that could be helpful. Probably the easiest one to do is because
there’s already a spot in the law for it under the 1332 waivers is the insurance programs.
A lot of states are doing these now reinsurance, and it basically brings down the cost for
everybody by paying the insurance directly for some of the larger claims. So, you essentially
take those claims out of the pool when you calculate the premiums are based on what’s
remaining in the pool. So, lower premiums can entice the healthier people to join, which
then also can further reduce the premiums. It also has — it also helps reduce the amount
of tax credits, too. The lower the premiums, the lower the tax credits are as well. So, these are going on at the state level.
Do I think it works better at a federal level because of pooling because, especially these
really large claims, you really want to take them out of the pool across all states? And
so from a pure actuarial standpoint, doing it at a federal level will provide your smoothest
adjustments to your claims pool. They can because these larger claims can obviously
fluctuate a lot, and then, in turn, you might have premiums fluctuating if you can’t absorb
all of them on a consistent basis. So, that’s just some thoughts that I had
on what I see from the markets today. Thanks. Thomas P. Miller: Okay. Well, thank you all.
Thank you for inviting me, but I probably invited myself, so it would be a little straining
of credibility on that point. Sometimes when I talk about this issue, I
adapt Samuel Johnson in a similar way to the effect that, like Republicans trying to take
on health policy reform: “You’re not surprised that it’s not done well, but that it’s
attempted at all.” So, too, for Wendy’s exploring private law, behaviorally adjusted
alternatives to the individual mandate. David referred to my lack of Illinois credentials.
I did spend the shortest spring I ever had in May of 1974 as a summer law associate at
a law firm in Chicago. And so in keeping with the themes here, we’ve got Chicago Justice;
David went to medical school at UC, so Chicago Medicine; Chicago Economics; and now Chicago
Improv, because the partners there were laughing by the end of the summer at the work I had
done. All right. Moving on. To update the classic
words of mythical ex-Met baseball player Chico Escuela. The individual mandate “been berry,
berry good to me.” I have a little pent-up supply here. I’ve been teaching millennials
in law school. I can’t use my pop-cultural references beyond the last decade or two,
so I’ve got an oversupply of unused material, and you’re going to get it today. The first Republican-sponsored incarnation
of the individual mandate, courtesy of our friends in the early 1990s at the Heritage
Foundation, pretty much got me on the health policy map with the first full-fledged think
tank paper opposing it. And after that debacle, tied to the primary failure of the Clinton
plan, most Republicans and conservatives buried the mandate idea for more than a decade. By
the way, I learned from David a long time ago, if you don’t cite yourself, other people
wouldn’t cite you as frequently as you want them to. So, I’m following that path. Obamacare
certainly revived the individual mandate as an actual part of the ACA, which turned out
to be good for book sales as the most unpopular element of that law. After the mandate’s
enactment, but before its initial implementation nationwide, there were plenty of speaking
opportunities to point out that a few Republicans had gone astray from the main herd. We rolled ahead to the Supreme Court’s consideration
of whether the individual mandate was unconstitutional and might take down the rest of the law with
it. So, don’t let me count the ways, again, for how the mandate was flawed. I’ve been
there and done that many times before. And even if you wanted it to work, in theory,
it really didn’t accomplish much in practice other than to annoy too many people. So, the
individual mandate story is essentially like many other past and present health policy
reforms — seemed like a good idea at the time, before we went into drink. Let me get to a couple of quick conclusions,
and we’ll go on to Wendy’s paper in particular. The bottom line is that the mandate deserves
the least credit, and not a lot, for the coverage expansion. It was primarily due to the generosity
of subsidies and how they were targeted, and the Medicaid expansion, which didn’t need
a mandate to throw people into it and many states were happy to do that with federal
money. In US politics, unlike European politics,
we need to remember that we are neither willing to be sufficiently coercive nor sufficiently
generous to move as close as we imagine we can get to universal coverage. There are ceilings
on both of those efforts, which then create floors on how much we can accomplish through
those existing tools. The bigger problem is our choice of assumptions and givens. If you
let me make my own assumptions and givens, I can achieve a lot of things. But until we
reexamine what those assumptions are and change them, we’re going to be left to choose only
among the least worst of several inadequate and disappointing solutions. And you can do
on the one hand and on the other hand, but it turns out that most of those one hand and
other hand exercises, at least as I look through the paper, end up always saying the intervention
hand is the one that is able to reach a little bit deeper in your pocket than the other invisible
hand. Now, one of the traditionally lazier defenses
of the individual mandate is it is necessary to ensure balanced risk pools for health insurance.
The argument goes that the left to their own risk-segmenting preferences, insurers and
premium-paying customers would prefer to swim in healthier risk pools together at the country
club. On the other hand, high-risk people are at best transferred to separate pools
to reduce premiums at the club pool, or the other alternative is to try to throw younger
and healthier people in the individual market into a single pool whether they like it or
not. From a health policy planner’s standpoint, leaving choices to individuals about where,
how, or how much they want to purchase health insurance just complicates more important
political goals, even if they can’t quite pull off more universal commands. Health insurers really just want to stay in
business and move more product. As one insurance executive told me about a decade ago, the
saying used to be, “We’ll sell whatever dog food the dogs will eat.” The problem
is that if the younger, healthy pups aren’t hungry, well, a mandate could be better for
sales or at least we will need to talk more to the pups’ owner, which is the employer-based
system. The deeper problem, of course, could be best explained in the updated words of
former New York City mayoral candidate Jimmy McMillan. But offering more attractive products
that cost less and provide more value, well, that is apparently just too much harder. So, as much as there’s background rhetoric
and mood music about ensuring that everyone has guaranteed assurance of valuable health
care services and better health, the mandate’s core purpose really is financial — getting
someone preferably younger, healthier, or less expensive to pay more, if not a lot more,
in insurance premiums to cross-subsidize other people who cost too much to insure and can’t
or won’t pay the freight. So, the mandate is sort of the 21st-century version of a draft
for the health insurance pools that ensures what policymakers and CBO budget scorers want
but cannot achieve without a stronger push. Of course, it turns out that the often-repeated
imagery of the three-legged stool needed to support the ACA — for which one leg was
regulation of benefits and rating rules, the second was income-based subsidies, and the
third was the individual mandate — it ran into some air turbulence, and several of the
legs got very wobbly and shortened if not completely sawed off. But even if the stool
was flattened into not much more than a thin seat cushion of silver-loaded tax subsidies,
they made an excellent flotation device for insurers still staying afloat in troubled
insurance exchange marketplaces. The search, though, does somehow continue
for something that can work like the mandate promised to but did not appear in the wild.
Hence the updated resort to the magic of behavioral economics for a really groovy solution to
enrollment and coverage problems. Now, this is a somewhat less direct echo of earlier
more stimulus-response directed experiments in getting subjects to peck the right
keys and gain valuable rewards. Although you often can get college students in psych labs
to do things, they might resist in the real world. The promise or premise of nudge-based
behavioral economics paternalism is that this won’t hurt a bit, except when push comes
to shove. There are quite a few insights from the behavioral
economics literature, though not always applied in the right places, mostly about systemic
decision-making biases. We’ve got a roster of them. Optimism bias, illusion of control
bias, the anecdotal fallacy, choice overload, and complexity, hyperbolic discounting, and
bounded rationality. These echo with my own experience. I’ve been on Capitol Hill. You
see them all the time. You can observe a whole lot just by watching. That’s the flip side
of behavioral economics of public choice. And of course, we have the greatest one of
all, status quo bias in health policy, where no matter what failed in the past, we’ll
just add some more layers or barnacles on top of the hull and just say, “Well, we’ll
patch it with some other material to work around what we did before.” Now, let’s talk about solutions. And it’s
always good to search for solutions. And I appreciate the heroic efforts to try to come
up with some things which will make things other than what they are. We can start with the low-intro rates. It
has been tried before not only in cable TV contracts — well, real estate, for example,
worked pretty well, but we actually also have done this in public programs. We say nothing
down a lot of times. We just don’t fund our entitlements or we underfund them or we
say that “well, there’s some rate restrictions, which will make it seem cheaper.” So, we’ve
tried the low-intro rates, and they work for a period of time until eventually you’d
have to pay the balloon note, although we’re stretching it out pretty far. I like the idea of longer-term contracts.
But there are just a lot of mechanical issues in making them come about. If you’re going
to have the exit penalties, you’ve got to think about what are going to be the switching
rules if you want to have more than one choice one time, as has been the problem with guaranteed
renewability. You’ve got to have switching and settlement rules, which are more complicated
unless you then have to absorb some degree of bounded choice beyond the initial selection
process. My one point of quibble with Wendy’s analysis
of alternatives to the individual mandate involves her rather casual discard of the
continuous coverage, HIPAA extension approach. Of course, Republican lawmakers trying to
advance it did not understand it or know how to explain it and therefore didn’t know
how to sell it. But the missing ingredient was how it could interact with sufficiently
funded high-risk pool coverage protection. It would be hard to make that invisible risk
pool protection if you want to actually have sufficient incentive effects, so the pools
probably have to be visible and have to actually be paid for. But it would close the loop on
the eventual access to mainstream market coverage, protected against preexisting condition limits,
because the enrollees in the high-risk pools would requalify after they’ve been in the
pool for 18 months. So, you basically had the equivalent of folks going into the hockey
penalty box for a period of time, they got dinged, but they got to get back out on the
main ice, having re-qualified. And it’s a way to provide a bit of a disincentive to
not be covered, but not one all the way without recovery. Where are we left with all this? Well, there
are a lot of more exotic alternatives, which we’re not able to entertain politically.
So, the main alternative until we’re really ready to consider alternatives is it’s going
to take a lot of money, and we’re going to have to make it rain. And therefore, I
suggest we’re going to need the helicopters of the Federal Reserve. We’re working on
it already. Thank you very much. David Hyman: All right. So, we have an absolute
scarcity of seats there, so I get to stand. And we’ve got just over half an hour left.
So, what we’re going to do is spend probably 15 minutes or maybe a little less with the
panelists talking amongst themselves and then open it up, so we’ll have 15 to 20 minutes
for conversation more broadly. I do want to say optimism bias is what gets
me out of bed in the morning. So, I think we should have a little more love for some
of these behavioral biases. And even if we don’t like them and even if we think that
at least some of them are primarily found among undergraduates at elite schools that
happen to have enrolled in psych classes and so they’re the guinea pigs, you should worry
about the generalizability of the phenomena and offsetting institutions and all those
things. You know, to the extent, it helps us predict more effectively how people will
behave. We should not be hostile to them, but we should be simultaneously conscious
of their limits. So, with that, I have my own set of questions
if we run out of them, but let me just start by asking Wendy if she’d like to respond
to anything that she’s heard from the panel. Wendy Netter Epstein: Yeah. So, I mean, I
appreciate everybody’s comments. The goal here is to move the conversation forward,
so I hope that we’re doing that. Just sort of a blanket way of addressing the
sort of criticisms of the way the Affordable Care Act is set up, I’m trying to be explicit
in this paper kind of not to make it a defense of the Affordable Care Act or to argue that
the Affordable Care Act is a bad idea. I just want to take where we’re currently at and
try to work within the confines of the regime. And actually, I think that some of the points
that Tony made — so humorously, I will note — support the reasons why we need to have
some of these interventions. So, the fact that people can wait until they are sick to
purchase insurance, I mean, that’s why we have risk pools that have a lot of sick people
and not a lot of healthy people. So, I think part of the goal of the conversation is to
figure out how do we address that consequence of now having an Affordable Care Act without
an individual mandate sort of underpowered to try to get healthy people into the risk
pools. You know, I think I’ll just take on one
other thing. So, the criticism about how I address the continuous coverage option. So,
I didn’t talk about this today, but in the paper, what I say is that not many alternatives
to the individual mandate have been discussed on the policy stage. One of them was this
continuous coverage idea, which was relatively short-lived. And I will say that I think the
major problem with the continuous coverage idea is that you are penalizing people for
the decision to reenroll an insurance. So, I think that that could have unintended consequences
because what you really want is if somebody has had a lapse and insurance, you want them
to fix that as soon as possible. You want to prompt them to enroll an insurance policy.
And if you now make it 30 percent more expensive for them to re-up their insurance, I think
that that’s problematic, although I take the point that hopefully, it has the effect
of deterring them from lapsing in the first place. But I think I’m going to sort of
open it up for other comments and questions before I do too much more. David Hyman: Well, let me then start with
a specific question and then we can perhaps kick around. So, how — if you think of this
— Shari said, I think quite explicitly that this is both mostly about the cost. Tom said
that the rent is too damn high. Shari said that the cost is what’s driving the reluctance
to enroll. But you’ve written an entire paper that says, “Yeah, it’s cost, but
I’ve also got all these behavioral economics explanations as well.” So, relative shares, how much of this is driven
off of behavioral economics versus neoclassical economics? And if it’s mostly neoclassical,
shouldn’t you be writing about how we should get the cost of health care down, which would
get the cost of insurance down, rather than coming up with clever strategies to get people
to pay for overpriced health insurance because health care is overpriced? Wendy Netter Epstein: Yeah. I mean, by the
way, I think that is absolutely still a valuable enterprise. And I hope to write about that,
and I hope lots of other people are writing about how do we get the cost of insurance
down, which probably has a lot more to do with hospital prices and provider prices than
just this narrow look at the premium issue. But the — the prior part of the question
was? I forgot. David Hyman: Relative shares. Wendy Netter Epstein: Oh, relative shares,
right. We don’t know. Right? I mean, this is why we need to be doing more experimentation;
we need to be doing more surveying. The study that Chris and I did on this very short-term
basis, relatively small sample size, but we were surprised to see that the increased subsidy
at least in our little slice of data here didn’t move people, right? You would have
thought if you throw $500 more at people that that would make them more likely to buy insurance
than our base case and than some of these other no cost, I mean, the generosity frame
or even some marketing as really a no-cost solution. And that’s not what we found. So, maybe future studies will prove us wrong,
and that’s why we need to keep pressing on these issues. But I don’t think it’s
entirely clear that just throwing more subsidies at this is going to be the answer. I also
— maybe I’ll ask Tony to weigh in on this because most of the economists that I talk
to about this additional subsidy idea had told me that it’s quite inefficient to actually
offer additional subsidies because you’re going to be — it will ultimately lead to
increased demand over what would be efficient. So, I’m not sure that just the throwing
more money at it is the way to address it without considering some of these other options. David Hyman: So, that sounds like all behavioral
economics and no neoclassical economics. Wendy Netter Epstein: No. That’s why I set
it up as there are more — there’s many reasons that people are not buying insurance,
and I think we need to consider what those reasons are. I also think that we need to
have some targeting here, right? If we can identify the people who aren’t signing up
for insurance because it’s too costly, we could offer them a different solution than
the people who aren’t signing up for insurance because they’re overly optimistic and think
that they’re not going to use their policy and that they’re just throwing away their
premiums. So, I think that that’s part of the goal here is to do some segmenting. We’re
really good at market research now, and we’re really good at offering the right products
to the right people. Maybe we need to do more of that with health insurance. David Hyman: Shari, how about — Thomas P. Miller: Continuing to our Illinois
references. All quotes are ultimately attributed to Lincoln, whether they’re apocryphal or
not. And he used to say, “You can fool some of the people all the time and all the people
some of the time, and behavioral economics hopes to fool enough of the people often enough
to make it pay for more than it seems it’s worth.” David Hyman: I think that’s actually P.
T. Barnum, but okay. So, Shari, you’re in the business, right? I mean, you — do you
think hiring some more market researchers will let you segment the market in ways that
will let you achieve those goals? Shari Westerfield: Again, I’m an actuary,
so no, I don’t think in those terms. But I’m sure our marketing people would say,
“Oh, yeah, that’s a great idea.” But I just think that it’s — there is a value
decision being made. For those people who are actually looking into it, I think there
is a portion of the segment or the population — and I don’t really know how big — that’s
not even trying. Now that maybe I think where Wendy is kind of get it is like, why are those
people not even interested to find out enough information? There probably is that group,
but I think, by and far, it is a value question for most people. “Do I spend my money on
this, or do I get a new iPhone or something?” I don’t know. Some of those trade-offs are
what people are addressing. David Hyman: Tony, you’re an economist.
You deal with trade-offs. Anthony LoSasso: That’s right. It’s on
my business card. I mean, I think it’s — I guess as I said in my earlier comments, unless
you start to deviate from community-rated policies. I mean, because what we’re talking
about here is trying — what Shari is saying and what Wendy is sort of allowing for is
that, well, people don’t — it’s the price. And people don’t see. You just can’t.
It’s really hard to force somebody to buy something that they don’t think is a good
value. I mean, mandates or not. And so how do you solve that? Well, I mean, make it cheaper.
So, then, how do you make it cheaper? Well, then you have to start deviating from what
the law says. And so that’s — so, you’d have to change the law or do — I don’t
know. Or go outside the law. I don’t know. But I do think there’s this fundamental
issue here of the sort of non-insurable expenses being brought in and then expecting other
people to subsidize them and buy the policies, again, the inflated premium policies by virtue
of the preexisting. And so I was always a little more sanguine about properly funded
high-risk pools or other mechanisms that could deal with those because, again, we don’t
want to — we’re compassionate to society. We don’t want to throw people out to the
wolves. So, we deal with — but don’t try to ram it — don’t try to ram the solution
to that problem through the insurance market, and thereby, prevent the insurance market
from working like a market should. And so, you know, I think all of what we’re
talking about here are these elaborate kind of Rube Goldberg-esque schemes that are trying
to solve this fundamental incompatibilities that’s happening that was indeed foisted
upon the market. And so, you know, redirecting subsidies towards those who are truly facing,
you know, genuine health care problems for which they cannot get an affordable policy,
you know, always struck me as a — there’s a lot of details there to work out because
there’s still adverse selection issues and all of that and then insurer potential, insurer
behavior, untoward behavior to try to pitch people into the high rates of it. So, it’s not like it’s an easy — look,
if this was easy, we would have licked this problem already. So, yeah. It’s definitely
complicated, but I was always a little more optimistic about those types of approaches.
I mean, that leads us outside of what the Affordable Care Act is. As Wendy said, she
— Wendy Netter Epstein: That’s what we had
before the Affordable Care Act, right? Anthony LoSasso: Well, I said properly funded
high-risk pools. I don’t think that they were ever funded in a serious way because,
again, it turns out that there’s a lot of those preexisting conditions. And maybe that
becomes a transitional problem as you move towards something more universal. I’m intrigued
by, you know, defaulting people in though there are potentially lots of problems with
that. Reinsurance, it sounds great on paper, but then I always say, “Well, why wouldn’t
Anthem be buying this? Why aren’t the companies buying this if it was just basically free
money?” I could just — Thomas P. Miller: Someone else pays for it. Anthony LoSasso: Well, then they love it.
Yeah. If somebody else is paying for the reinsurance, sure, that’s great. And so — but, again,
firms are fully capable of buying their own reinsurance and presumably then, you know,
reducing premiums and getting more customers. Why doesn’t that happen? Shari Westerfield: Right. That reinsurance
isn’t free, of course. Anthony LoSasso: Exactly. Shari Westerfield: So, the cost of that has
to go back into the premium. So that’s why it’s not helping. You have to get the claims
out of the pool entirely for it to actually help. David Hyman: Chris, let me bring you into
this conversation. Chris, I omitted from my introduction, has edited a book entitled “Nudging
Health: Behavioral Economics and Health Law,” where there was a conference at Harvard that
included a bunch of presentations on these sets of issues. So, can you sort of bring
in from that book and also from your research something on these sets of issues? Christopher Robertson: Sure. You know, I think
it is right to say that behavioral economics or nudging, generally, is looking for a marginal
behavior change. We’re looking for whether a different way of framing something or a
different way of constructing it can change a certain number of people to do what the
policy is hoping they’ll do. And here what we’re trying to do — because we have not
adopted a fulsome tax and subsidy structure — we’re trying to use the premium from
healthy, relatively wealthy people as the behavioral change. We’re trying to get them
to pay that premium even that wouldn’t strictly be rational to do so. And so I think one of the sort of ships passing
in the night issue of this panel is that we’re trying to approach the questions from a notion
of rational behavior, but ultimately, these questions of subsidies to the extent they’re
paid through taxes is not justifiable in a simple rational act or individual donation
idea. The very idea of a tax is to force someone to pay in a way that they would otherwise
probably prefer not to. So, it’s interesting to me as we think about
a generosity frame, for example, is an individualist notion of what Europe would call us a solidarity
frame that we’re going to chip in together through taxes. The generosity frame says,
“Well, let’s see if you individually want to chip in,” which then creates a — switching
back to neoclassical economics — creates a collective action problem, a free-rider
problem if you have some people chipping in and others not. So, I think — I hope the
common has illustrated, you know, we’re really working, you know, between classical
economics trying to find a behavioral margin when really the larger question I think is
a distributional question, is about who we want to get to pay for what. David Hyman: Which is what Washington is always
about. So, actually, let me focus on the generosity framing for a minute. So, Wendy, you said,
you know, part of the challenge and the generosity framing is insurance companies are above cable
companies but not so much in terms of the high popular regard and trust, although, in
practice, we repost huge amounts of money with them and there’s a regulatory framework;
we can leave all of that aside. But I guess the question is, you suggest,
well, maybe we should start an insurance company that will be more trustworthy, right? And
I guess my question to you was, well, what about the co-ops that got started in the exchanges?
And I suspect many of the people at co-ops are obviously consumer owned. They have a
different set of incentives than even a nonprofit enterprise. And I think — Wendy Netter Epstein: They weren’t so successful. David Hyman: — most of the people in the
room probably know something about the dismal success rate in many of the states. So, do
you expect you’ll get better people to run your generous insurance company co-op? Wendy Netter Epstein: I mean, we might be
talking about apples and oranges. I don’t know the reasons that the co-ops failed would
be the same hurdles that a new insurance entrant that has this different framing would face.
But to the extent that there is an advantage to being a big player in an already consolidated
market, Chris and I were actually talking about, well, what if it’s a subsidiary of
one of the big companies that’s like separately branded and sort of comes out with this pitch
as their way to attract new insureds? So, I don’t know. I’m not so moved that the
co-op failure means that there can never be any new entrant into this market. I think
that would be kind of a depressing way to look at it. And I — David Hyman: I’m filling Tony’s role. Wendy Netter Epstein: Yeah. He’s appreciative,
I’m sure. So, I wouldn’t shut it down just for that reason, but you know, I’m
cautious about this. Like, this is — it was kind of a crazy idea when I first started
writing this paper. And to be honest, what happened was I went to go present a really
early-stage version of this paper at Mississippi College, and I sort of thought that the students
that I was presenting this to who were kind of my target population — they were young,
many of them were just hitting 26, and we’re going to have to be in this market. And I
sort of thought they would laugh me out of the room. It’s a relatively conservative
group of students. And I was surprised at how many of them thought it was a good idea.
So, I mean, I was almost not even going to put it in the paper until I went and presented
it at the Mississippi College School of Law. So, I guess I’m still feeling it out. I’m
not sure how optimistic we should be, but I think it’s worth exploring. David Hyman: Chris, you’re on. Christopher Robertson: Can I just add? I thought
you were also going to invoke the experience of these religious health care sharing organizations,
where various religious groups agree to cover each other and they’re more or less formal
and whether they’re actually insurance under the law and whether they should count for
— whether they satisfy the individual mandate was a whole other realm of questions. But
I — and so they’re problematic also in different ways for whether they actually work. But I’m illustrating — I want to bring
them up here because there’s other variations on the generosity frame that could be worth
exploring empirically. So, it could be, we people of religious type X are going to join
this insurance company for other people like us, whatever. You could have the Boy Scouts
alumni or the university alumni club or whatever the group is; you could leverage a narrower
notion than universal generosity. And so a different version of that would also be patriotism.
You could leverage like, you know, the way we sold war bonds or the way we got people
to recycle their rags during World War II was, you know, in fact, we want you to contribute.
So, you could try to leverage that sort of notion, too. It’s not generosity, but maybe
your responsibility. Wendy Netter Epstein: Personal personality. Christopher Robertson: And so these are all
different ways of leveraging this, again, nonrational motivations or whatever ones you
may have. Let’s find them and manipulate you. David Hyman: Tom? Thomas P. Miller: We do exercise a generosity
frame often in our modern politics. So, we’re generous with other people’s money. They’ll
pay for it; the rich will pay for it. There’s lots of generosity attributed to other people,
just not to ourselves. David Hyman: So, that actually takes us to
— we’ve got about 15 minutes left, so let’s see if we have some questions. Let
me just clarify: questions or brief comments, but not speeches and on the topic that we’re
considering here rather than the broader universe. No, I’m focusing to the audience in general. Q: Do we need a microphone or we just — David Hyman: I think we do have a microphone
coming around. So, I’m about to call on you, but I’m just giving general comments
for everyone. So, please. Q: Well, I have four questions. So, it might
add up to a small speech. And I’ve been doing health policy for 30 years, and Tom
and Joe have been putting up with me for that long. I’ve been doing inequality policy
basically for five years and looking out after the lower folks, trying to include them, people
at the bottom of the heap. First question I have is: You talked about
private — the second meeting I’ve been to in a couple weeks was a talk about private
law remedies. The other people at Brookings were talking about — it included regulatory
action, but here, it just seems to include anything the government’s not doing this
legal. So, it would be voluntary actions in the market. Is this just a way to get a lawyer
into the conversation? But anyhow, so the second thing you asked
for other research, right? And I’m really glad. I thought, Shari, you did a wonderful
job because I’ve done a lot of research on the markets. But not just the actuaries
because they’re very logical, but interview the insurance companies, the marketing guys,
interview the regulators, highly regulated industry. It’s a very cutthroat industry
of the individual market. And if anybody is nice, they’re going to get the — the way
they are market, they’re going to get to $100,000 therapy or the million-dollar therapy
now. So, being nice is not really possible unless they are monopoly and then they charge
a lot anyhow. So, that’s — in terms of behavioral economics, I’m thinking the rich
field is look at the tax code and what that does to employer behavior and offering coverage
and how the wealthiest employees at the wealthiest firm drive up the price because it’s an
open-ended tax break for the higher — that’s where the behavioral economics plays as it
does with the cutthroat behavioral economics in the insurance market. So, that’s where
you — I mean, I think it’s not the cute little stuff, but it’s behavioral economics. And finally, I think I’m a cost guy. So,
like, where I live, my kids, one of them is a blue collar, one of them is white collar
in Northern Virginia. Somebody working in a nursing home married to somebody in a warehouse
is making $40,000, $45,000 as a couple. At Kaiser, which is the cheapest option on the
exchange, that’s going to be about 20 grand, maybe 15 to 20 grand. That’s half of their
income. How does the small employer gets money? The top of the market’s driven up the price
to where they can’t afford it. I mean, you can wiggle, waggle shiny little whatever in
trying to sell them this. There’s a huge disconnect. So, anyhow, that’s my question — four
questions. Costs. Is it really cost? What about private law? Is this you can do anything
you want? And these areas of exploration of behavioral economics. So, I’m sorry. It
was a speech, but I got away with it. David Hyman: It was actually four questions.
So, Wendy, why don’t you pick up whichever one of those you’d like? Wendy Netter Epstein: Yeah. I mean, the private
law question is fair. It’s a proxy of a term, right? I’m really trying to look at
what can we do within the confines of a current legal regime. And some of these do require
some sort of small — what I view is relatively small changes to the law to support them,
but I want to know what we can do under the current regime. And then I guess I’ll just take the last
point about the cost being prohibitive for people who are making $45,000 a year as a
couple. I mean, the subsidies should make it so that those people are not paying half
of their income, and that’s the way that they’re calculated, right? They still fall
within the subsidies. But you’re talking about right at the end, right? When you get
over 400 percent of the federal poverty level, that is problematic because those are not
necessarily wealthy people. Those are people for whom health care is expensive. So, that’s
why we were testing to see if you give those people subsidies doesn’t make a big difference.
And I think that’s an open question. I think that’s something we need to experiment more
with. David Hyman: Other members of the panel want
to speak to any of the questions? Thomas P. Miller: Well, private law should
mean contracts. And if public law doesn’t prohibit voluntary contracts from finding
willing buyers and willing sellers, you might have more interesting creative arrangements.
But because the public law says, “You can only make certain agreements for certain reasons
because we have overriding goals,” the bounds of what you can do through private action
and private law is limited. You’re trying workarounds, and in some cases trying to be
super clever in finding loopholes, or in other cases petitioning for waivers around the law
you just created that ties your hands. David Hyman: Other questions from the audience? Q: Thank you. Well, I’m Tara Sklar, also
with the University of Arizona College of Law. And I think it’s a very provocative,
interesting paper, and I enjoyed all the comments from the panel as well. And my question is regarding around the variations
in framing, and I was wondering if you’ve given much thought to why people save for
retirement in relation to the long-term care policies, long-term insurance policies. Because
it reminds me of the long-term care issues as well, like why people ought not to buy
long-term care insurance. And one thing that might come up is that if you, in addition
to the vignette, had have an older age renderings of a person when they’re answering a question
of themselves, they could upload a photo and see if that could change the likelihood of
them wanting to buy a long-term policy. Something like that — we can play with it more or
they can put themselves more in the future and try to, I guess, have less optimism bias. And the other thought I had was when you were
talking about the rising uninsured, how that’s probably a very not equally felt across the
demographics. And from what I’ve been reading, it’s much higher felt among Hispanic groups
in particular. And how to frame things so that you can really try to address some of
those cultural issues, whether it’s with the generosity framing or religious framing
or cultural framing, how to kind of get to that group where they really are the highest
group dropping out right now. Thank you. Wendy Netter Epstein: Don’t know what, you
personally answer this too, but can I just — I would just say, we need to do all of
that, right? We need to do a lot more testing of these concepts. We need to segment this
in all sorts of different ways. It’s like a very early pilot study that we were trying
to just get some data out for purposes of today, but I think we also want to test different
frames, not just generosity. So, I think that those are all really good
ideas. With the age suggestion, I’m not sure I totally followed because we were — you’re
asking the same person to picture themselves being older and to see if that would change
what they think their own decisions would be. Q: [inaudible] where you replicated it where
it changes the eagersim what you would say when you — sorry. What you would say when
you — how much of your savings do you want to put towards your future retirement? And
they split the group so that the experimental group had a rendering of themselves, 40, 30,
whatever their age is, 20 years older than where they are now and a group that didn’t
see an older rendering of themselves and that impacted how they respond to this area. Wendy Netter Epstein: Oh, I see what you’re
saying. Q: Yeah. Wendy Netter Epstein: Okay. So, made it more
concrete for them to — Q: Right. Like a visual. It doesn’t have
to be that per se, but if you’re already sort of giving an online digital experiment,
anyway, have them upload a photo and see that kind of effect. Christopher Robertson: So, riffing off that
idea, there’s all sorts of interesting potential manipulations that could be done around a
deepfake videos. Are you familiar with this idea that you can like put celebrity’s face
on someone else’s body having them do some horrible thing or some great thing? Well,
in principle, we could have video stimuli of a scenario of someone not having health
insurance and getting cancer or getting in a bad car accident. And you would upload your
picture, and we will put your own face in this video and maybe even using virtual reality
headsets, have someone a day in the life of your horrible future unless you buy health
insurance today. Wendy Netter Epstein: Now you put this out
there publicly. We’re going to have to do this. We should figure out how to do it. I
don’t know. It’s a good idea. David Hyman: A way to torque your priors of
the subjects. You might want to give him some probabilities of the likelihood if you wanted
to make it concrete but still realistic. Anthony LoSasso: And I would just add to that,
just that, you know, economists have this sort of — well, this expression of that
— well, we believe — we believe what people do, not what they say. So, in other words,
we believe in revealed preference as the ultimate arbiter of their behavior rather than what
they say because there’s a lot of things that go behind why somebody answers a question
a certain way. It may not actually reflect when the rubber hits the road and they actually
have to make a decision. Are they really going to — in the privacy of their own home, in
their underwear, buying insurance or whatever, are they really going to buy the higher, the
generosity-framed one versus a cheaper alternative? Christopher Robertson: And that’s why there’s
been a huge move in the fields towards starting with these sort of lab studies and then moving
forward to true field experiments. Anthony LoSasso: Yeah. No. Christopher Robertson: That’s the trajectory. Anthony LoSasso: I’m all for that. I think
that’s right. That’s the right direction. David Hyman: Other questions from the audience.
Please, right over here. Q: Hi. Thank you. Betsy Wieand. I have a comment,
not so much a question, about the return of premium policies. So, in a past life, I spent
five years with the American College of OB-GYNs. And so I just had a comment about how you
would treat pregnancy care as a benefit that you were using. Because it is preventive care
if you’re using prenatal care, but you wouldn’t necessarily want to discourage people from
having children considering our declining fertility rate. Wendy Netter Epstein: Yeah. I mean, so that’s
a really good point. There are lots of details that we need to be worked out about this,
and that’s, like, my number one concern, I would say, in addition to what percentage
would you actually be able to return of the premiums. But you really do not want to deter
people from getting needed care, and pregnancy would be one good example. But then if you
do have to pay for pregnancy expenses, then obviously that lowers the percentage that
you’re able to return. So, there’s also a possibility that as we’re talking about
segmenting that, maybe the return of premium policies aren’t not right for certain populations
compared to others as well. Christopher Robertson: This is also a form
of moral hazard to the extent that you think that pregnancy is an expensive cost for the
insurer. There’s going to be a limit to a private law solution. The insurer doesn’t
care about our demographics of birthing in the United States and — the insurer cares
about their risk pool. So, being able to discourage their insureds from getting pregnant if that’s
the moral hazard, then that would be a way to achieve that and segment the risk pool. Thomas P. Miller: We’ve already been experimenting
for over a decade with advanced return of premium policies. They’re called health
savings accounts, where you get the lower premium and you get the money. Now, the problem
is we get conflicted saying, “Well, people aren’t going to then spend money on the
care they need.” There’s evidence that’s mixed on that because the net long-term savings
at least from the recent research indicate people do treat as an extra insurance benefit,
and ultimately, there aren’t a lot of large balances over time on that. So, we end up
just treating as another tax-advantaged way to spend money on health care. David Hyman: Which those of us in the health
care sector like a lot. Additional questions from the audience or comments? Anybody? Please,
over here. Q: Thank you. Bill Arnone with the National
Academy of Social Insurance. A few months ago, you had a forum, and one of the speakers
was from a relatively new company called Bind, where they are selling health insurance on
demand, contradicting the point you made about, when we buy home insurance, what do we choose?
You buy just when you need it. Have any of you looked at that concept? And they’re
still in business. What’s your reaction to it? Thomas P. Miller: Yeah. I haven’t seen the
follow-up data on it. And as you know, you’ve got enough experience in health care markets,
all kinds of products are rolled out. You need to see whether in practice they deliver
what they’re trying to do. And sometimes it’s finding a market niche, but I organized
that conference, and it was certainly an interesting presentation. Again, it’s running in a direction different
than what other policy wants to try to make more uniform, so that we’re all in this
together. And the question is: Do you want to have a market which reflects different
preferences, or are there some overriding goals and we’re going to censor some of
those extreme preferences because we have other reasons to want to grab your money and
put it somewhere else? Christopher Robertson: I’ll just mention
that, you know, we throw around the word insurance, and Tony was talking in his presentation about
what the purpose of insurance is: is to indemnify for a catastrophic cost. And so, in that sentence,
the word insurance is being used in a technical sense. But when we throw a function even after
the house is on fire to buy — Q: — also the mandate penalty. What was
the evidence on how well the penalty worked? Because I remember there was a lot of discussion
about how low the penalty actually was and whether it, in fact, discouraged people from
not buying insurance. Wendy Netter Epstein: Yeah. So, I mean, that’s
an excellent question to which I think there is not a completely clear answer. I think
it was effective to a degree. I think it is hard for people to separate out the effect
that the subsidy had versus the effect of the individual mandate penalty. The one thing that I do in the paper, as I
say, we can at least draw on the experience that Massachusetts had before the federal
experiment with the individual mandate because they had a system of subsidies already in
place when they implemented the mandate so you can study the effect that the mandate
had separately from the subsidy. And there it did have a significant effect. I think,
again, there are certainly disputes about the percentage of people that signed up for
health insurance in the private markets. I’m putting Medicaid expansion to the side who
are engaging in this conversation. I don’t think that there’s a single cure
for all of our solutions and any of this, but I guess my concern is that sometimes we
consider that the perfect is the enemy of the good, and so I’m really hopeful that
maybe we will see some actual natural experiments. We’ll see some insurance companies try some
different things and really try to focus attention on this problem of the uninsureds. David Hyman: So, thank you all for coming. Christopher Robertson: Thank you.

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4 thoughts on “If we cannot live with the individual mandate, can we cover enough lives without it? | LIVE STREAM”

  • why dont we talk about how 40,000 americans die because they dont have healthcare or are too afraid to use their insurance out of affordability? we should be addressing this as a genocide of the poor. and insurance companies as politically approved death panels. medicare for all is cheaper nationally, and no one would need to die or have a masters degree to figure out their insurance.

  • "The Problem: Uninsureds"…You know, I hate to steal a line from a fucking communist of all things, but you're literally an enemy of the American people.

  • Note: This video refers to the University of Arizona's Christopher Robertson as "Christopher Robinson". A corrected video can be found here: https://bit.ly/2kqP6aW