Will Everyone End up in Obamacare Bronze Plans?

A blog about business and economics.
Oct. 16 2013 1:45 PM

Will Everyone End up in Obamacare Bronze Plans?

The bronze medal is pretty good!

Photo by Dean Mouhtaropoulos/Getty Images

Under the Affordable Care Act, individuals shopping in health care exchanges will be able to select plans from a variety of insurance companies. They will also be able to select a variety of tiers of plans—bronze, silver, gold, and platinum—with the basic idea being that bronze plan coverage is stingy while platinum plan coverage is extremely comprehensive. The more comprehensive plans are, naturally, the more expensive.

Ben Handel, Igal Hendel, and Michael D. Whinston have an interesting newish paper out (PDF) arguing that in practice everyone's going to get stuck with the bronze plan. The details of their argument are complicated, but the basic logic is simple.

The ACA itself is designed to solve the problem of adverse selection. If only sick people buy insurance plans, then insurance plans have to be expensive, so there's even more reason that only sick people will buy them, so they get even more expensive. Hence the individual mandate. What Handel, Handel, and Whinston are saying is that the exact same adverse-selection spiral is going to repeat itself inside the exchanges. Instead of unraveling all the way down to a state of noninsurance, it will unravel all the way down to the regulatory minimum of the bronze plan.


Now there's some irony here. If this analysis is correct, it reflects a screw-up on the part of the ACA's framers. On the other hand, one of the very most prominent conservative lines of criticism against the ACA is precisely that it sets the regulatory minimum too high. So on the merits, if the ACA really does work the way Handel, Hendel, and Whinston say it does, conservatives should be less unhappy about it. Conversely, I know many liberals feel the bronze plans are too stingy and in an ideal world subsidies would be higher and the regulatory minimum would be lower. My view is that the conservatives have the better of this argument. If we found an extra $100 billion a year lying around somewhere, I'd rather spend it giving people more money than on giving people more health care coverage.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.


Frame Game

Hard Knocks

I was hit by a teacher in an East Texas public school. It taught me nothing.

Republicans Like Scott Walker Are Building Campaigns Around Problems That Don’t Exist

Why Greenland’s “Dark Snow” Should Worry You

If You’re Outraged by the NFL, Follow This Satirical Blowhard on Twitter

The Best Way to Organize Your Fridge

The World

Iran and the U.S. Are Allies

They just aren’t ready to admit it yet.

Sports Nut

Giving Up on Goodell

How the NFL lost the trust of its most loyal reporters.

Chief Justice John Roberts Says $1,000 Can’t Buy Influence in Congress. Looks Like He’s Wrong.

How Steven Moffat Made the Best Doctor Who Episode in Years

  News & Politics
Sept. 16 2014 2:11 PM Spare the Rod What Charles Barkley gets wrong about corporal punishment and black culture.
Business Insider
Sept. 16 2014 1:23 PM Germany Has Asked Google to Reveal Its Search Algorithm, but That's Not Going to Happen
The Eye
Sept. 16 2014 12:20 PM These Outdoor Cat Shelters Have More Style Than the Average Home
  Double X
The XX Factor
Sept. 15 2014 3:31 PM My Year As an Abortion Doula
  Slate Plus
Slate Plus Video
Sept. 16 2014 2:06 PM A Farewell From Emily Bazelon The former senior editor talks about her very first Slate pitch and says goodbye to the magazine.
Brow Beat
Sept. 16 2014 1:27 PM The Veronica Mars Spinoff Is Just Amusing Enough to Keep Me Watching
Future Tense
Sept. 16 2014 1:48 PM Why We Need a Federal Robotics Commission
  Health & Science
Sept. 16 2014 1:39 PM The Case of the Missing Cerebellum How did a Chinese woman live 24 years missing part of her brain?
Sports Nut
Sept. 15 2014 9:05 PM Giving Up on Goodell How the NFL lost the trust of its most loyal reporters.