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ACA and Adverse Selection The Affordable Care Act (ACA) is the nation’s health reform law that was put into place in 2010. ACA consist of two pieces of legislation: the Patient Protection and Affordable Care Act (PPACA), enacted on March 23, 2010, and the Health Care and Education Reconciliation Act (HCERA), enacted on March 30, 2010 (About the Law). Jointly they are referred to as the Affordable Care Act or ACA. The ACA will be implemented in stages. The ACA aims to reform both our nation’s public and private health care, and ultimately providing health coverage to over 25 million Americans by 2023 (About the Law). One of the most important aspects of the ACA is the employer mandate. “The employer mandate is officially part of the Employer Shared Responsibility provision under the ACA, the federal government, state governments, insurers, employers and individuals are given shared responsibility to reform and improve the availability, quality and affordability of health insurance coverage in the United States” (cite).
Prior to the ACA there were numerous issues regarding health care in the Unites States. One of those issues was adverse selection. Adverse selection is an issue that has been prevalent to insurance of all kinds, especially health insurance. Adverse selection occurs when sellers have information that buyers don’t or vice versa. In the health insurance field it occurs when people make insurance purchase decisions based off their knowledge of their insurability or the likelihood they will make a claim. This can happen in a variety of ways. For example, the applicant might have information about the risk that is not known to the insurer, or the insurer might have access to the information but be unable to incorporate it fully into the price of coverage, due to factors such as antidiscrimination laws or the limitations of the insurer’s rating system. In order to fight adverse selection, insurance companies try to reduce exposure to large