Greater subsidies aren’t enough: Lowering the complexity of enrollment is needed to bring more and healthier people into the market
The Affordable Care Act, popularly known as Obamacare, aimed to reduce the high number of uninsured Americans by making medical insurance coverage cheaper and more available. And it did, bringing the number of uninsured Americans down from roughly 47 million in 2010 to close to 27 million in recent years.
That’s still a lot of people lacking health insurance, however.
And there are lots of reasons for that, including repeated efforts to repeal or gut the law. But Obamacare’s foes aren’t the only problem. In the state marketplaces, set up by the law to provide insurance to those shut out of the regular private market, participation remains low, even though federal subsidies can cover a large portion of the cost of premiums.
The low take-up rate is a problem because a smaller insurance pool is likely to contain more sick people who need a lot more medical care than a large pool would, and that leads to higher premiums for everyone in the pool. To hold costs in check and prevent a rush to the exits, marketplaces need to get more people, especially the relatively healthy ones, to sign up.
One solution is to offer more premium subsidies, further lowering the cost of health coverage for lower-income individuals. But “frictions” may also matter for enrollment — for example, complexity of learning about one’s coverage options and subsidies, and the hassle costs of enrolling. A working paper shows how important these frictions are, and offers a solution: reduce the frictions through simple interventions, such as providing targeted information and reminders to enroll.
The research — by UCLA’s Richard Domurat, a recent Ph.D. graduate in economics; Isaac Menashe, associate director of policy evaluation at the Covered California marketplace; and UCLA Anderson’s Wesley Yin — revealed evidence that such simple interventions can be enough to lower the behavioral frictions of searching and signing up for health insurance, resulting in markedly higher enrollment.
What’s more, the authors find that new enrollees are much healthier than people already in the marketplace, so their simple interventions lowered risk to insurers, putting downward pressure on premiums.
“Pairing subsidies with efforts to inform consumers and to simplify enrollment may increase enrollment more than through subsidies alone,” the authors write. Their findings suggest that more concerted interventions that target these same frictions — such as more aggressive outreach, a simpler sign-up process and the use of auto-enrollment — could dramatically increase enrollment while lowering premiums and public subsidy spending.