The Affordable Care Act Can Survive Low Enrollment and Adverse Selection in the First Year

Low enrollment levels in the health insurance marketplaces in the first year may also mean disproportionate enrollment of high cost individuals. This could lead to higher premiums and destabilization of the non-group market, but this is unlikely. First, policies put in place in the law, specifically risk corridors and risk adjustment, will provide insurers with some significant financial protection. Second, low enrollment does not necessarily mean adverse selection – there are strong incentives for young adults to enroll. Third, insurers cannot necessarily recoup any 2014 losses by raising 2015 premiums. Insurers will need to set premiums for 2015 based on the expected enrollment in 2015, not based on any losses that may occur in 2014.