PPACA in Theory and Practice: The Perils of Parallelism

Abstract:     
Most employed Americans obtain their health insurance through their employer. Monahan & Schwarcz argue in “Will Employers Undermine Health Care Reform by Dumping Sick Employees” 97 Va. L. Rev. 125 (2011), available at http://ssrn.com/abstract=1651308 that the Patient Protection and Affordable Care Act (“PPACA”) will destabilize employment-based coverage (“EBC”), by encouraging employers to “dump” high-risk (i.e., costly to insure) employees onto the state-run exchanges. The result will be more expensive exchange-based coverage (and less expensive EBC) than would otherwise be the case, undermining popular support for PPACA. Professors Monahan and Schwarcz condemn such conduct, and argue that an immediate fix is absolutely necessary.

This reply, forthcoming in the Virginia Law Review – In Brief, evaluates the costs and benefits of preventing employers from engaging in “risk classification by design” (“RCBD”), and offers seven reasons for skepticism about Monahan & Schwarcz’s analysis and recommendations. President Calvin Coolidge memorably observed, “if you see ten troubles coming down the road, you can be sure that nine will run into the ditch before they reach you, and you have to battle with only one of them.” Until we know whether RCBD is one of the nine troubles that will run into a ditch, or the one that we will have to do battle with, space on the immediate policy agenda would be better devoted to the multiple severe implementation challenges that already beset PPACA.

Number of Pages in PDF File: 20

Keywords: PPACA, health reform, dumping, employer health insurance

JEL Classification: I11, J32, K32

working papers series