On the role of health insurance as an “enabling technology” that facilitates risky behaviors…


The vast majority of the ads shown on the www.doyougotinsurance.com website promote health insurance as an “enabling technology” that facilitates various risky behaviors; e.g., uncelibate sex, binge drinking, bungee jumping, white water rafting, etc. These ads are (condescendingly and stereotypically) targeting millenials whose overpriced premiums are needed in order to cross-subsidize premium costs for older, sicker people. It turns out that the financing model underlying the so-called Affordable Care Act (ACA) critically depends upon such cross-subsidies in order for ACA to be financially sustainable. Without these cross-subsidies, the more likely outcome for ACA is what Cutler and Zeckhauser (1998; cf. https://www.degruyter.com/view/journals/fhep/1/1/article-fhep.1998.1.1.1056.xml.xml) refer to as an “adverse selection death spiral” (see also AEI Resident Fellow Scott Gottleib’s Forbes piece on this very same topic @ http://is.gd/jnh04G).

Since the ACA is designed to vastly expand Medicaid and offer subsidies to households with incomes up to 400% of the federal poverty level, then somebody has to pay for it. And if the plan works as it is supposed to, young middle class workers will have to enroll in droves to pay for overpriced insurance. However, based upon the early returns from enrollment at the Federal and state websites, this does not appear likely. Thus the aggressive ads designed to convince otherwise reticent millennials to sign up for overpriced insurance.  Apparently health insurance can be “fun” because it makes it possible to not have to fully internalize the costs of risky behaviors.  This would be the Peltzman effect on steroids

The aforementioned website (doyougotinsurance.com) is “…a project of the Thanks Obamacare campaign, created by the Colorado Consumer Health Initiative and ProgressNow Colorado Education to educate everyone about the benefits of the Affordable Care Act.”


Leave a Reply