In the waning days of his administration, President Obama encouraged Americans to take advantage of the opportunity to get health insurance in what may be the last open enrollment period under the Affordable Care Act. Given the incessant chatter about the incoming administration’s plans to “repeal,” “repeal and delay,” or “repeal and replace” the act, is this just a fool’s errand — wasted effort adding more people to the slate of millions who will lose coverage if the ACA gets dismantled as promised?
Perhaps. Or perhaps Obama is seeking to capitalize on the well-studied phenomenon known as loss aversion. In a nutshell, loss aversion means that it feels worse to lose something than never to have had it in the first place. Consumers, including those signing up for health insurance, tend to make relative judgments about their own welfare, rather than absolute judgments, and losses loom larger than gains.
By urging more Americans to enroll for health insurance now, Obama is simultaneously satisfying an ethical responsibility for expanded insurance coverage and making it more difficult for Republicans to dismantle the ACA. The more people who are insured, the more who will object when this benefit stands to be lost.
As the transition of power approaches, loss aversion seems to explain the Republican approach to the ACA. President-elect Trump has at times suggested that he wants to keep covered everyone who already has insurance, and even perhaps complete a move towards universal coverage. Similarly, House Speaker Paul Ryan has indicated that he seeks to somehow ensure that the repeal leaves “no one worse off.”
To the extent that Republicans are serious about these commitments to do no harm, Obama can be credited with an important victory. Even if his landmark legislation is repealed, he will have succeeded in setting a new standard for evaluating the American health care system. In the 1990s and 2000s, the percentage of uninsured Americans fluctuated in the 16 to 17 percent range, peaking at 18.2 percent in 2010. Republicans had been relatively complacent to tolerate that level of non-coverage. The ACA cut the rate to about 10 percent, and Republican leaders apparently feel a political constraint to keep it from returning to pre-ACA levels. By setting a new normal, the ACA has made a profound change in US health policy.
Given this new normal, solidified by loss aversion, Republicans intent on ending Obamacare face no easy task. Familiar Republican bromides about medical liability reform and letting insurers compete across state borders are not going to provide coverage to the 20 million people who were insured under the ACA and who stand to lose their insurance if the act is repealed.
A free market alone can’t cover people who are both sick enough to need lots of medical care and poor enough to be unable to afford unsubsidized premiums and unlimited cost-sharing exposure. Instead, what is needed is some combination of public insurance plans and market regulations. And that means what the Republicans come up with may look a lot like Obamacare.
It will be hard to do no harm — meaning avoid causing losses — with policies that are to the right of the ACA, since its core features were cribbed from prior Republican congressional proposals. The individual mandate and market-based exchanges were proposed by the Heritage Foundation and piloted by Mitt Romney when he was the Republican governor of Massachusetts.
Framing, another principle of behavioral science that we cover in our new book, “Nudging Health: Health Law and Behavioral Economics,” will also play a role in shaping future health insurance plans. This principle acknowledges that how information is framed and presented affects how it is perceived. Looking to framing, we can bet that whatever plan emerges from the Trump administration will be pitched in terms of tax cuts and won’t include a “mandate,” one of the most salient features of Obamacare.
Perhaps the Republicans will dust off Senator John McCain’s health plan from 2008. McCain called for a big refundable tax credit ($2,500 for individuals and $5,000 for families) paid to those who secured health insurance coverage through their employers or on the individual market. Combining both loss aversion and framing effects, note that the exact same economic transfer could be described as imposing a $2,500 or $5,000 tax penalty — an unpalatable loss — on those who fail to purchase health insurance. And, of course, the ACA’s original, much-maligned “mandate” to buy health insurance was simply a tax penalty on those who failed to do so.
To achieve the Trump-Ryan promise to do no harm, a more aggressive policy may be needed. Behavioral science shows that people are biased in favor of the status quo, and have a tendency to avoid cognitively onerous activities like reevaluating the health insurance plan they are on. Accordingly, many people are likely to proceed on autopilot and fail to go through the process of researching, selecting, and buying a health insurance policy, even if it is the rational thing to do in order to secure both health insurance coverage and a tax benefit.
Building on this principle, Robert Moffit and Nina Owcharenko of the Center for Health Policy Studies at the Heritage Foundation once proposed that, “To maximize the take-up of coverage under the McCain plan, the refundable health care tax credit could be accompanied by a system of automatic enrollment in health insurance, either at the workplace or through a statewide health insurance exchange.”
By flipping the default rule to opt-out rather than opt-in — so people would need to undertake some effort in order not to be insured — Republicans could simultaneously take advantage of status quo bias to make sure the vast majority of people get covered while at the same time touting protection of the liberty to go without health insurance. Since this is so close to what is allowed under Obamacare — get covered or pay a penalty — it may suffice to satisfy the role of the ACA’s mandate to make sure there are enough healthy enrollees in insurance markets to subsidize the sick.
The state of the world changed dramatically on Nov. 8, 2016, but behavioral science suggests that the health care landscape may not change as much as Republicans would have us believe. And that is more than fine with us.
Christopher T. Robertson, JD, is professor of law and associate dean for research and innovation at the University of Arizona James E. Rogers College of Law. Holly Fernandez Lynch, JD, is executive director of the Petrie-Flom Center for Health Law Policy, Biotechnology, and Bioethics at Harvard Law School. I. Glenn Cohen, JD, is the faculty director of the Petrie-Flom Center. They are the editors of “Nudging Health: Health Law and Behavioral Economics” (Johns Hopkins University Press 2016).