The Affordable Care Act's Rulemaking Process

October 25, 2012

The Affordable Care Act (ACA) seeks to reform the nation's entire health care system through new rules and regulations, some of which have yet to be implemented. According to a series of research papers by Jerry Ellig of the Mercatus Center at George Mason University and Christopher Conover of Duke University, the ACA's regulations were rushed and are inadequate in achieving their goals, says Diane Calmus, a research assistant with the Heritage Foundation.

According to the authors, agency analyses were incomplete and insufficient to inform decision making. This led to an underestimation of the costs and overestimation of the perceived benefits. These were done using interim final rulemaking which is an expedited process to create rules without the normal notice and comment period. The result is that the cost-benefit analysis and reviews of alternative methods were forgone in order to pass quick regulations.

  • The requirements on children with pre-existing conditions, for example, overstated the reduction in bankruptcy risk by as much as a factor of eight.
  • Similarly, the research estimated early retirement reinsurance costs between $9.2 billion and $10 billion over four years compared to the agency's estimates of $39.8 million.
  • Furthermore, they estimated that keeping coverage for dependents up to age 26 would cost between $0.9 billion and $1 billion, whereas the agency estimates the cost at $10.4 million.

Furthermore, regulators failed to consider the moral hazards of the new rules, which are a result of people changing their habits because they don't have to worry about the outcomes. For instance, people may smoke or drink more knowing that insurance will pay for any medical treatment. Furthermore, people can use the services for relatively minor issues because it is available.

Congressional politics often plays a large part in the quality and thoroughness of regulations. For example, Congress may impose tight deadlines to ensure that a new law or requirement is implemented before newly elected members have a chance at obstruction. In the case of the ACA, there was strong public disapproval, which resulted in a rush to get the bill passed and deadlines tightened to make sure that the new law was not changed.

The president has an even larger influence on regulatory action. Agency analyses are often discouraged and reviews by the Office of Information and Regulatory Affairs are limited to just approving the regulation. Since the ACA was a top priority for Obama, agencies crafted their analysis to support the decisions of the White House.

Source: Diane Calmus, "The Affordable Care Act's Rulemaking Process: What the Research Shows," Heritage Foundation, October 15, 2012.

 

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