The Affordable Care Act Can Survive Low Enrollment and Adverse Selection in the First Year

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ACA can survive a slow start with low enrollment thanks to built-in protections

The troubled launch of the Affordable Care Act's (ACA) Marketplaces clearly undermined intial enrollment in health insurance coverage. These issues may lead to lower enrollment in insurance plans and higher average costs than anticipated, but neither of these potential circumstances is likely to affect the long-term future of the law.

This report reviews the provisions already built into the ACA that will help to mitigate the effect of low enrollment and adverse selection, high enrollment in insurance marketplaces among people who are older, and thus less healthy and more costly.

Key Findings

  • Low enrollment does not automatically lead to adverse selection

  • Risk corridors—sharing risk among all of the qualified exchange plans—may help to reduce adverse selection by allowing higher-performing plans to offset the costs of the lower-performing plans.

  • Temporary reinsurance programs can help to pay the medical expenses for high-risk plan enrollees.

This report was prepared by researchers at the Urban Institute, with support from the Robert Wood Johnson Foundation, as part of the Quick Strike Series.