Affordable Care Act Case Study

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The affordable care act presented the United States with the most extensive overhaul since the passage of Medicare and Medicaid in the 1960’s. The act was a response to staggering statistics on the price of healthcare and the resulting uninsured rate within the United States. The affordable care act uses Individual Mandate and Health Insurance Exchanges to combat major factors causing high insurance cost and low insured rates.
As with most reform, the public has not been one hundred percent unified on the potential effectiveness of the Affordable Care Act. Based on 2006 Massachusetts reform and signed into law in 2010 the bill attempted to learn from problems contained within other state reforms but has drawn as much negative criticism as …show more content…

While the individual mandate combats adverse selection and attempts to play on the core of human decision making, the exchanges employ old fashioned competition and market forces to penetrate an insurance market not exactly teeming with deals. Both provisions attempt to effect market conditions and in a greater attempt move toward a solution to our nations under insured and over-priced healthcare …show more content…

From an uninformed, simple perspective, one would understandably summarize the logic of the provision by assuming the act aims to influence people to spend the money on health insurance to avoid the tax penalty. Or, purchase the insurance since potential customers are going to pay and get nothing for their money if the fee is chosen. The individual mandate does indeed attempt to influence American’s behavior but is also chopping at a larger characteristic of the insurance markets. The provision attempts to reduce what is called “Adverse Selection.” To describe the force adverse selection exerts on the insurance market imagine the following situation regarding the loosely similar automobile insurance market. Imagine there is no requirement to purchase auto insurance to drive a car on our roads, not that auto insurance does not exist, but there is no regulation on when or even if it needs to be carried. In this situation it seems likely that many would not choose to purchase insurance until they need it, likely after an accident. Insurance companies then would reasonably assume that all, or most of those that looked to purchase the insurance were those who are in need of it, those with broken cars. Now translate that into the healthcare market, if healthcare is

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