Tuesday, February 07, 2012

Adverse Selection at the Supreme Court

The brief for the private respondents in the individual mandate case can be read here.

It's a good day for the concept of adverse selection on one hand-- I count twenty mentions, and they are not incidental.

On the other hand, the brief discounts the difficulty in countering adverse selection via relatively simple restrictions, such as limited enrollment periods and coverage-waiting periods.

I tend to agree that it should be possible, if one is willing to use penalties of meaningful impact, to have both must-issue clauses for insurance (so sick people cannot be refused coverage) and prices that are not "overly" based on risk. But there would have to be a cost to waiting until sick to get coverage -- worse coverage, higher prices.

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