• Free riders

    Good article in the Boston Globe today on free riders:

    The number of people who appear to be gaming the state’s health insurance system by purchasing coverage only when they are sick quadrupled from 2006 to 2008, according to a long-awaited report released yesterday from the Massachusetts Division of Insurance.

    The report was released as state lawmakers consider proposals to make it harder for consumers to jump in and then dump their health insurance coverage.

    The result is that insured residents of Massachusetts wind up paying more for health care, according to the report.

    “The active members subsidize some of the costs tied to those individuals who terminate within one year,’’ the report says.

    The report was released as state lawmakers consider proposals to make it harder for consumers to jump in and then dump their health insurance coverage.

    Let’s review.  Massachusetts’ health care reform is similar to the ACA.  So by looking at what’s happening in Massachusetts, we can get an idea as to what will happen nationally.  An increasing problem is that people are deciding not to purchase care when they are healthy, and then getting it once they become sick.  They are “free riders”.

    This removes healthy people from the risk pool, increases the cost of the insured pool, and raises costs for everyone.  As Austin Frakt points out, the increased cost isn’t much in Massachusetts (about 1%), but it’s there.

    This isn’t an unexpected problem; that’s why there is an individual mandate.  But when you make the mandate too low, people will pay the fine (or avoid it) and be free riders.

    The worst thing you can do, though, is eliminate the mandate altogether.  But that seems to be what the opponents of reform want to do….

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