Did the ACA's "guaranteed issue" provision cause adverse selection into nongroup insurance? Analysis using a copula-based hurdle model

Abstract

Prior to the Affordable Care Act (ACA), insurance companies could charge higher premiums, or outright deny coverage, to people with preexisting health problems. But the ACA's “guaranteed issue” provision forbids such price discrimination and denials of coverage. This paper seeks to determine whether, after implementation of the ACA, nongroup private insurance plans have experienced adverse selection. Our empirical approach employs a copula-based hurdle regression model, with dependence modeled as a function of dimensions along which adverse selection might occur. Our main finding is that, after implementation of the ACA, nongroup insurance enrollees with preexisting health problems do not appear to exhibit adverse selection. This finding suggests that the ACA's mandate that everyone acquire coverage might have attracted enough healthy enrollees to offset any adverse selection