The impact of policy

The Society of Actuaries went through the Health Care Cost Institute data recently and produced an amazing graphic:

This graph shows the number of inpatient days per 1,000 covered life years.

It shows a few things. First, small group and large group utilization tend to move in parallel to each other with large groups having slightly sicker or higher utilizing populations. This makes sense as small groups are less likely to offer insurance and that offer or not offer decision is non-random; a small group will avoid offering insurance if they know they are extremely likely to have horrendous premiums due to very high expected utilization. People in the job market know that as well so someone who knows that they are likely to be in the hospital a lot will try to stick with a large group employer.

The far more interesting thing is that the discontinuity in the individual market. Pre-ACA market reforms of guaranteed issue, community rating and subsidization, the individual market had perhaps a third of the hospitalization rate of large group and forty percent the utilization rate of small group. As soon as the ACA market reforms went into effect on January 1, 2014, utilization sky rocketed.

This shows the effect of underwriting. Underwritten policies from 2009-2013 were pretty good at identifying and avoiding people with predictable healthcare costs. There is still hospitalizations of people getting hit by buses and being told that they have cancer during a routine check-up but these are mostly random events. As soon as explicit underwriting is banned, utilization sky rockets as people who had been kept out of the individual market moved into it and got services that they needed.






6 replies
  1. 1
    low-tech cyclist says:

    And some of that utilization in the first year or two was almost surely pent-up demand: people were getting checkups and treatments in 2014 and 2015 that they would have gotten earlier if they’d had adequate coverage. Would be interesting to see whether it dropped back down in between the small and large group levels in 2016-2017.

  2. 2
    Ohio Mom says:

    Just wanted to say, there are lots of us reading posts like this one who don’t have anything to add.

    I was sure the ACA helped people and here is the proof in a graph.

  3. 3

    […] report, a collaboration with the Health Care Cost Institute (hat tip to David Anderson of Duke), is crystal clear about the reasons for the jumps in coverage and utilization. Chiefly, the launch […]

  4. 4
    tybee says:

    Just wanted to say, there are lots of us reading posts like this one who don’t have anything to add.

    yup. comment numbers do not reflect readership.

  5. 5

    […] report, a collaboration with the Health Care Cost Institute (hat tip to David Anderson of Duke), is crystal clear about the reasons for the jumps in coverage and utilization. Chiefly, the launch […]

  6. 6
    Raoul says:

    Your last sentence is everything. Republicans can’t stand that people are getting the services they need.
    It’s beyond infuriating. Frankly it’s immoral.

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  1. […] report, a collaboration with the Health Care Cost Institute (hat tip to David Anderson of Duke), is crystal clear about the reasons for the jumps in coverage and utilization. Chiefly, the launch […]

  2. […] report, a collaboration with the Health Care Cost Institute (hat tip to David Anderson of Duke), is crystal clear about the reasons for the jumps in coverage and utilization. Chiefly, the launch […]

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