Options to Expand Health Insurance Enrollment in the Individual Market

Issue

The individual insurance market functions better with larger numbers of people enrolled. Higher enrollment makes it is easier for insurers to set premiums that reflect their expected health care costs and allows them to spread administrative expenses over a larger base. Further, incentivizing healthy individuals to enroll may lead to lower average premiums.

Goals

To analyze six policy options for expanding enrollment: 1) enhancing tax credits for young adults; 2) increasing tax credit amounts; 3) extending credits to more people; 4) both increasing and extending credits; 5) adding standard reinsurance; and 6) adding generous reinsurance.

Methods

Analysis through RAND's COMPARE microsimulation model, which combines economic theory, nationally representative data, and experiential data to project consumer and business responses to policy changes.

Key Findings and Conclusions

Options to enhance, increase, or extend tax credits could increase total enrollment in the individual market by 1.0 million to 3.4 million and the insured population by 800,000 to 2.6 million. Adding reinsurance could increase enrollment by 1.2 million to 5.4 million and total coverage by 900,000 to 3.4 million. Costs for these options range from $2.5 billion to $18.8 billion, with those policies producing the biggest coverage gains generally requiring the biggest public investments.