October 29, 2015

HSAs ARE THE REPUBLICAN DEFAULT:

Republicans Just Killed Their Own Health-Care Idea (Cass R. Sunstein, 10/29/15, Bloomberg View)

During the early health reform debates, right after Barack Obama was elected president, Republican enthusiasm for automatic enrollment was spurred by the analogy to 401(k) plans. A lot of research shows that if workers are automatically signed up for such plans, participation increases significantly, even if it is easy to opt out. The saving grace of this approach is that people remain free to choose: If they need the money now, they can choose to stop contributing.

For health insurance, you might embrace the same policy: Assume that people want it, but allow them to go their own way. Nudges are fine, but coercion is not.

Of course, the Obama administration and Democrats in Congress made a different choice, in part on the theory that the whole system of health care reform could unravel without the broad participation that a mandate would promote. Even so, Obamacare included an automatic enrollment provision, designed to complement, rather than replace, the individual mandate.

Under that provision, employers with more than 200 full-time employees must automatically enroll new, full-time workers in one of the employer's health insurance plans, from which they could opt out. The Department of Labor said it would issue regulations to implement the requirement by the end of 2014 -- but failed to do so.

It's unclear why the department stalled, but any such regulations would not be simple to write. The first problem is that many employees already have health insurance from other sources (typically spouses and parents); for them, automatic enrollment is a waste. True, they can opt out, but behavioral science shows that default rules tend to stick. There's a real risk that even with a right to opt out, a lot of employees would end up in plans they don't need.

The second problem involves this question: What's the right default plan? 

Posted by at October 29, 2015 3:13 PM
  

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