Creating new markets is a prevalent approach for implementing large social programs. Assuming firms have full information about the relevant parameters upon market inception is commonplace in the literature. In contrast, we develop an adaptive learning model with selection to study how firms’ knowledge of demand and cost affects the market equilibrium. We estimate alternative learning models with data from the California ACA exchange and assess their external validity using novel data on firms' predicted costs from insurer rate filings. The learning models provide statistically significant improvements in fit relative to the standard model that assumes firms have full information. Most of the improvement results from allowing firms to learn about the relationship between demand and cost. Firms with full information can increase profit, but at taxpayers' expense. Regulation that prohibits firms from using certain consumer information to set premiums makes them react more to the information they can use.

Creating a public firm to compete with private firms is an increasingly debated intervention to address inefficiency in concentrated markets. I develop a mixed oligopoly model with alternative firm objectives and estimate it with consumer-level data from the California insurance exchange, where one-third of consumers have access to a public firm. In the best-fitting model, the public firm places more weight on consumer surplus than producer surplus. Adding a public firm decreases premiums, improves welfare in concentrated markets, and increases surplus the most for disadvantaged subpopulations. Enhancing subsidies for private plans, a leading alternative intervention, increases premiums and reduces welfare.

Risk adjustment is a common policy for mitigating the effects of adverse selection when government regulation limits insurer ability to rate consumers according to their expected risks. I study the social welfare implications of risk adjustment. I first show theoretically that risk adjustment may reduce social welfare because it can increase the expected risk of consumers who select into the insurance pool. I then assess how risk adjustment affects social welfare in the Affordable Care Act (ACA) insurance exchanges. Using consumer-level data from the California exchange, I estimate demand for insurance and obtain estimates of marginal cost that I relate to premiums to account for adverse selection. I compute equilibrium premiums under alternative scenarios and find risk adjustment raises premiums for less costly exchange plans. However, there is minimal net effect on social welfare because the ACA’s price-linked subsidies shield consumers from premium increases. I conduct policy simulations using the estimated model and find the impact of risk adjustment is sensitive to the subsidy design. If ACA price-linked subsidies were converted to fixed subsidies as proposed in some legislative alternatives to the ACA, risk adjustment would decrease annual per-capita consumer surplus by $200 and social welfare by $400.

To compare the health insurance marketplace plan choices of young adults (18-34 years) to older adults (35-64 years) in the first two open enrollment periods (OEP) in Washington State.

The vulnerability of cloud computing systems (CCSs) to advanced persistent threats (APTs) is a significant concern to government and industry. We present a cloud architecture reference model that incorporates a wide range of security controls and best practices, and a cloud security assessment model—Cloud-Trust—that estimates high level security metrics to quantify the degree of confidentiality and integrity offered by a CCS or cloud service provider (CSP). Cloud-Trust is used to assess the security level of four multi-tenant IaaS cloud architectures equipped with alternative cloud security controls. Results show the probability of CCS penetration (high value data compromise) is high if a minimal set of security controls are implemented. CCS penetration probability drops substantially if a cloud defense in depth security architecture is adopted that protects virtual machine (VM) images at rest, strengthens CSP and cloud tenant system administrator access controls, and which employs other network security controls to minimize cloud network surveillance and discovery of live VMs.

The Affordable Care Act (ACA) was designed to increase health insurance coverage while limiting the disruption to individuals with existing sources of insurance coverage, particularly those with employer-sponsored insurance (ESI). To limit disruption to those with coverage, the ACA implements the employer mandate, which requires firms with more than 50 employees to offer health insurance or face penalties, and the individual "affordability firewall," which limits subsidies to individuals lacking access to alternative sources of coverage that are "affordable." This article examines the policy impacts of the affordability firewall and investigates two potential modifications. Option 1, which is the "entire family" scenario, involves allowing an exception to the firewall for anyone in a family where the family ESI premium contribution exceeds 9.5 percent of the worker's household income. In Option 2, the "dependents only" scenario, only dependents (and not the worker) become eligible for Marketplace subsidies when the ESI premium contribution exceeds 9.5 percent of the worker's household income. Relative to the ACA, RAND researchers estimate that nongroup enrollment will increase by 4.1 million for Option 1 and by 1.4 million for Option 2. However, the number without insurance only declines by 1.5 million in Option 1 and 0.7 million in Option 2. The difference between the increase in nongroup enrollment and the decrease in uninsurance is primarily due to ESI crowd-out, which is more pronounced for Option 1. Researchers also estimated that about 1.3 million families who have ESI and unsubsidized nongroup coverage under current ACA policy would receive Marketplace subsidies under the alternative affordability firewall scenarios. For these families, health insurance coverage would become substantially more affordable; these families' risk of spending at least 20 percent of income on health care would drop by more than two thirds. We additionally estimated that federal spending will increase by $8.9 billion and $3.9 billion for Options 1 and 2, respectively, relative to the ACA.

Of three alternatives examined for expanding health insurance and lowering premiums with no additional federal spending, extending the Affordable Care Act's subsidies to all consumers and placing a floor on subsidies had the greatest benefit.

Issue: Republican presidential candidate Donald Trump has proposed to repeal the Affordable Care Act (ACA) and replace it with a proposal titled “Healthcare Reform to Make America Great Again.” Proposed reforms include allowing individuals to deduct the full amount of premiums for individual health plans from their federal tax returns, providing block grants to finance state Medicaid programs, and allowing insurers to sell insurance across state lines. Goal: To assess how each of these reforms, when implemented individually, would affect insurance coverage, consumer out-of-pocket spending on health care, and the federal deficit in 2018. Methods: RAND’s COMPARE microsimulation model. Key findings and conclusions: The policies would increase the number of uninsured individuals by 16 million to 25 million relative to the ACA. Coverage losses disproportionately affect low-income individuals and those in poor health. Enrollees with individual market insurance would face higher out-of-pocket spending than under current law. Because the proposed reforms do not replace the ACA’s financing mechanisms, they would increase the federal deficit by $0.5 billion to $41 billion. OVERVIEW OF POLICY OPTIONS AND APPROACH Since the Affordable Care Act (ACA) was enacted in 2010, critics have advocated that the law be repealed and replaced with an alternative set of reforms. Republican presidential candidate Donald J. Trump has offered a “repeal-and-replace” proposal titled “Healthcare Reform to Make America Great Again.”1 In this brief, we consider the impact of repealing the ACA and enacting three of the key policies proposed by Trump. The policies considered are only elements of Trump’s overall health care reform proposal, which includes several features we did not model, including increasing price transparency and removing barriers to entry in the prescription drug market.2 We analyzed each policy in conjunction with repeal of the ACA, rather than as a combined package. By considering each policy on its own, we can more easily understand each option’s effect on coverage, consumer out-of-pocket costs, and the federal deficit. The policies we consider include: 1. Fully repeal the ACA. In this scenario, all provisions of the ACA are repealed, including Medicaid expansion and means-tested tax credits for coverage in the health insurance marketplaces. All market reforms in the individual market are eliminated, To learn more about new publications when they become available, visit the Fund’s website and register to receive email alerts. Commonwealth Fund pub. 1903 Vol. 31 The mission of The Commonwealth Fund is to promote a high performance health care system. The Fund carries out this mandate by supporting independent research on health care issues and making grants to improve health care practice and policy. Support for this research was provided by The Commonwealth Fund. The views presented here are those of the authors and not necessarily those of The Commonwealth Fund or its directors, officers, or staff. For more information about this brief, please contact: Christine Eibner Senior Economist RAND Corporation eibner@rand.org 2 The Commonwealth Fund including community rating and prohibiting insurers from denying coverage to people with preexisting conditions. Also includes the repeal of ACA measures designed to offset the cost of Medicaid expansion and subsidies for marketplace insurance, such as revenue generated through the individual and employer mandates, reductions in the rate of Medicare spending growth, and the implementation of new taxes and fees.3 2. Repeal, plus allow individuals to fully deduct health insurance premium payments from their tax returns. Current laws and provisions outside the ACA exclude employer spending on health insurance from income and payroll taxes. However, prior to the ACA, the significant tax advantages available to those with employer-sponsored coverage did not extend to those enrolled in private, individual-market policies obtained outside of an employer.4 The ACA began to bridge this gap by providing means-tested advance premium tax credits (APTCs) for purchasing individual market insurance. Trump’s proposal would eliminate APTCs, and allow individuals to use pretax dollars to purchase individual market insurance. 3. Repeal, plus block grants for Medicaid and the Children’s Health Insurance Program to the states. Medicaid and the Children’s Health Insurance Program (CHIP) are jointly funded by states and the federal government. The federal government currently contributes 50 percent to 75 percent of total costs for Medicaid enrollees who were eligible prior to the ACA, higher amounts for CHIP enrollees, and higher amounts for those made eligible for Medicaid because of the ACA. Under a block-grant system, the federal government would instead give states a fixed amount to fund their programs. We assume that, under Trump’s plan, this amount would be based on pre-ACA Medicaid and CHIP spending levels, including spending on expansions that occurred prior to the ACA.5 In addition, we interpret Trump’s block-grant program as including CHIP, although Trump’s plan does not specifically mention this program. 4. Repeal, plus promote the sale of health insurance across state lines. Health insurance has historically been regulated by the states. Therefore, insurers seeking to offer policies in multiple states must comply with each state’s insurance regulations. Prior to the ACA, state insurance regulations varied widely, particularly with respect to underwriting, guaranteed issue, and coverage denials. The ACA established minimum standards, but if the law were repealed, the significant regulatory variation across states would likely return. Although details have not been fully specified, this policy would allow insurers in one state to sell plans in state without complying with the other state’s regulations. Because we analyzed only some of Trump’s proposed policies, we cannot conclude that a scenario that combined the effects of these reforms would be an accurate representation of the full impact of Trump’s health plan. As a result, we do not report a scenario combining these reforms in the main text of this brief, although it is available in the technical appendix. We used the RAND COMPARE microsimulation model, which estimates the impact of health policy changes. Specifically, we analyzed how the proposed reforms would affect the Donald Trump’s Health Care Reform Proposals 3 distribution of health insurance coverage by income and health status, the federal deficit, and the level of out-of-pocket spending in the individual market. To quantify the impact on out-of-pocket spending, we focused on the individual market because many of the policies enacted by the ACA and proposed by Trump are targeted to this market. In particular, the Trump proposals would eliminate key ACA individual market reforms, including: • premium tax credits and cost-sharing reductions for individual market enrollees • prohibitions on rescinding and denying coverage to those with preexisting conditions • community-rating regulations that allow insurers to set premiums only based on age, smoking, and geography, without considering sex or health status6 • minimum standards for plan generosity and covered benefits • annual and lifetime caps on health benefits. Trump’s plan would remove these requirements and subsidies and introduce new policies that affect the individual market, including tax deductions and the ability to sell plans across state lines. Modeling health reform proposals that have not yet been turned into legislation can be challenging because of lack of specificity. Further, Trump would implement several other proposals that could interact with the health policies, such as changes in tax rates. Consequently, we make several modeling assumptions, which we discuss briefly in the How This Study Was Conducted section at the end of this brief. A detailed description of the model and assumptions is provided in the technical appendix. In the technical appendix, we also compare our results to two previous studies that have estimated the impact of Trump’s proposals.7

This technical appendix provides an overview of the methods we used to estimate the impact of relaxing the ACA’s age rating regulations and providing enhanced advance premium tax credits (APTCs) to young adults. In the first section, we provide a general overview of COMPARE. We then discuss the ACA’s rating rules and describe how we model changes to the rating bands. Next, we describe how we model the enhanced APTC scenario. Finally, we provide some sensitivity tests and additional results.

A key challenge of health reform efforts is to make health insurance affordable for individuals and families who lack coverage without harming those with coverage or increasing federal spending. The Affordable Care Act (ACA) addresses this challenge in part by providing tax subsidies to qualified individuals for purchasing individual insurance and retaining tax exemptions for employer and employee contributions to the cost of premiums of employer-sponsored insurance. These tax exemptions cost approximately $250 billion annually in lost tax revenue and have been criticized for favoring higher earners and conferring preferential treatment of employer-sponsored over individual insurance. We analyzed three options for leveling the financial playing field between the two insurance markets by reallocating the value of tax benefits of employer coverage. We found that one option that uses the subsidy formula employed in the insurance Marketplaces under the ACA for both the individual and employer-sponsored insurance markets, and additionally requires the subsidy to be at least $1,250 without an upper income limit on subsidy eligibility imposed, could expand insurance coverage and reduce individual market premiums relative to the ACA with no additional federal spending.

The Supreme Court has ruled that the Affordable Care Act's subsidies can continue in all states. According to RAND research cited in the court's majority opinion, a different outcome could've resulted in higher premiums and about 8 million uninsured Americans.

Describes how removing the Affordable Care Act's individual mandate would affect health insurance premiums and the overall numbered of insured.

Using the COMPARE microsimulation model, researchers estimated the effects of reduced enrollment of young adults (invincibles) in the individual health insurance market. Results indicate that reduced enrollment of invincibles is associated with only modest premium increases.

The goals of the Affordable Care Act (ACA) are to enable all legal U.S. residents to have access to affordable health insurance and to prevent sicker individuals (such as those with preexisting conditions) from being priced out of the market. The ACA also instituted several policies to stabilize premiums and to encourage enrollment among healthy individuals of all ages. The law's tax credits and cost-sharing subsidies offer a "carrot" that may encourage enrollment among some young and healthy individuals who would otherwise remain uninsured, while the individual mandate acts as a "stick" by imposing penalties on individuals who choose not to enroll. In this article, the authors use the COMPARE microsimulation model, an analytic tool that uses economic theory and data to predict the effects of health policy reforms, to estimate how eliminating the ACA's individual mandate, eliminating the law's tax credits, and combined scenarios that change these and other provisions of the act might affect 2015 individual market premiums and overall insurance coverage. Underlying these estimates is a COMPARE-based analysis of how premiums and insurance coverage outcomes depend on young adults' propensity to enroll in insurance coverage. The authors find that eliminating the ACA's tax credits and eliminating the individual mandate both increase premiums and reduce enrollment on the individual market. They also find that these key features of the ACA help to protect against adverse selection and stabilize the market by encouraging healthy people to enroll and, in the case of the tax credit, shielding subsidized enrollees from premium increases. Further, they find that individual market premiums are only modestly sensitive to young adults' propensity to enroll in insurance coverage, and ensuring market stability does not require that young adults make up a particular share of enrollees.