How People Will Game the [ObamaCare] System

There are a large number of “special enrollment periods” outside of the annual open enrollment season under which individuals can sign up for plans and subsidies.  These special enrollment periods will encourage healthy individuals to wait until they become sick and need coverage to buy it, raising premiums for everyone else.  For instance:

  • An individual can obtain coverage when he “is determined newly eligible or newly ineligible for” insurance subsidies.  Under this provision, a voluntarily uninsured worker in a family of four making $90,000 a year could request a $5,000 pay cut upon a cancer diagnosis, and become immediately eligible for taxpayer-subsidized coverage (because the family’s income would fall under 400% of federal poverty, making the family eligible for subsidies).
  • An individual can also obtain coverage when he “has a change in eligibility for cost-sharing reductions, regardless of whether such individual is already enrolled in a QHP [qualified health plan].”  Under this circumstance, an uninsured worker making 260% of poverty could, upon receiving an adverse medical diagnosis, ask for his pay to be cut to under 250% of poverty — because that change in cost-sharing status would make him immediately eligible for government insurance subsidies.
  • An individual can obtain coverage when that individual “gains access to new QHPs as a result of a permanent move.”  Here, individuals could easily game the system by moving from Philadelphia, PA across the Delaware River to Camden, NJ; that move would change their choice of plans, thus triggering a “special enrollment period.”  Anecdotal evidence suggests that some individuals may already be “moving” by utilizing mailing addresses in other nearby jurisdictions to obtain lower premiums; it’s possible to envision a scenario whereby an individual in Washington, DC could use a friend’s mailing address to “move” to Arlington, VA, and thus become immediately eligible for coverage and subsidies.
  • “An Indian…may enroll in a QHP or change from one QHP to another 1 time per month.”  While this exemption is due to interactions with the Indian Health Service, it again gives Indians a strong disincentive to obtain coverage until they need it — because they know insurance will be available to them at any point in time.

More of what Chris Jacobs has to say here.

Comments (7)

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  1. Devon Herrick says:

    When the individual health insurance exchanges are set up in 2014, there will be all manner of perverse incentives to game the system.

  2. Buster says:

    The exchange system will erode employer coverage because of the difference in subsidies in the exchange compared to the tax subsidy through work. Over time, the exchanges will implode from adverse selection. At that point I expect people to begin clamoring for a Medicare for All plan.

  3. Ken says:

    There are probably thousands of ways to game Obama Care. These are some of the worst.

  4. Brian Williams. says:

    Perhaps a new professional discipline will spring up to help people game the system. Or maybe there are enough lawyers already.

  5. Carolyn Needham says:

    Incentivizing pay cuts — this could create a vicious cycle. The data, without an eye towards incentive systems, could greatly skew the picture of poverty and health care in this country.

  6. John R. Graham says:

    Yes, and the IRS has not even begun to write regulatory guidance on how it will deal with these income cut-offs. Even if I keep the same household income for the whole year, the IRS is supposed to communicate this to the Health Benefits Exchange, and it will be one or two years old when the exchange gets it.

    If people start gaming the system by micromanaging their household incomes from month to month (which they are), we are going to need completely new bureaucracies to do real-time adjudication of household income between the IRS, the exchanges, and all the employers’ of the people in the household.

  7. Alfredo says:

    Because the majority of bakpcuntry filings are caused by medical bills. A simple hospital stay averages about $10,000 a day and then there’s the bill for any tests done, and doctors who see you in the hospital. (Any doctor who walks into a hospital room can bill the patient.)