Over at The Incidental Economist, Aaron Carroll points to this study which argues — as the government has in its many briefs defending the health law — that you can’t reform the insurance market without requiring (or encouraging in some other way) healthy people to purchase health insurance coverage:

The above results show that community rating was associated with a worsening of the non-group risk pool as younger and healthier individuals left the individual market while older and sicker individuals joined or remained in the market. To test the robustness of this conclusion, we used data from the National Health Interview Survey (NHIS) to compare changes in detailed measures of health status and utilization for people with non-group coverage in several community rating and non-community rating states. We found that those maintaining non-group coverage after the adoption of community rating were significantly more likely to have days when they were restricted to bed or when their activities were otherwise restricted because of health problems as well as more doctor visits and hospital stays. In other words, community rating in the non-group insurance market led to a pool of enrollees in poorer health. [...]

Our results provide a compelling portrait of the distortions that can result from community rating and guaranteed issue regulations in the non-group market when there are no provisions in place to keep people enrolled in coverage. The deterioration of the risk pool is consistent with predictions from economic theory and potentially lays the foundation for an adverse selection death spiral.

Indeed, there is an extensive history of states trying to exclude pre-existing condition exclusions without also instituting a minimum benefit requirement, and almost all cases have resulted in higher prices or issuers leaving the market. In Maine, many insurance providers doubled their premiums in three years or less, and all but one of the state’s HMOs experienced “at least one rate increase of 25% or more in 1998 or 1999.” New Hampshire was nearly left with no carriers in the market when Blue Cross Blue Shield of New Hampshire announced it was withdrawing from the individual market. And after New Jersey’s preexisting conditions provision took effect in 1993, the state’s individual insurance market became plagued by skyrocketing premiums. Between 1996 and 2001, the cost of the most generous individual insurance plans rose by more than 350 percent.

Conversely, a new analysis from a team of Massachusetts economists published today in the New England Journal of Medicine “concludes that the Massachusetts 2006 health law’s requirement that most residents buy coverage or pay a tax penalty has been pivotal to the law’s success.” The study found a “greater increase in the number of healthy people who signed up for coverage in the state’s subsidized health insurance program in 2007 — the first full year of the ‘individual mandate’ — than chronically ill people, compared with the months before.” The greatest spike in enrollment of healthy enrollment occurred in 2007 — “just before the tax penalty kicked in for failing to get coverage.”

As Carroll put it, if “one is in favor of a well-functioning insurance market in which everyone can obtain affordable insurance, one cannot advocate guaranteed issue and community rating and nothing else. One needs some way to keep adverse selection under control. To be blunt, one can’t just take the favorable parts of the ACA and reject the unfavorable part (the mandate), at least not with suggesting a replacement that will do the same job.”

Before the Affordable Care Act was signed into law, there existed no expedited pathway for approving generic versions of brand name biologic drugs — a new class of ‘wonder drugs’ that contain living organisms and could one day help treat everything from cancer to Parkinson’s disease. A provision in the health law tries to strike a compromise that would lower costs while giving brand-name manufacturers the patent protection they need to continue researching and developing new medicines. Under the law, generics can enter the market “after a brand-name biologic enjoys exclusivity for 12 years,” but now, biologics manufacturers and a bipartisan group of Senators — Orrin Hatch (R-UT) and Kay Hagan (D-NC) — are urging the Food and Drug Administration (FDA) to grant companies “an additional 12 years of exclusivity if manufacturers alter an existing product to improve safety or potency.” The Wall Street Journal has more:

Proponents of generics say they fear brand-name companies may continually tweak their products to get 12 more years of protection. Companies often try such “evergreening” with chemical drugs, putting out extended-release or extra-strength versions to stay ahead of generic competition. [...]

The Hatch-Hagan letter calls on the FDA to interpret the law’s reference to “exclusivity” as “data exclusivity.” Under that interpretation, generics companies might be barred for 12 years from citing the brand-name maker’s data, effectively delaying any application for a copycat version, said lawyers for the generics industry.

“It appears that the brand biologics interests are attempting to parse the meaning of exclusivity to pervert the stated intent of the statute,” said Robert Billings, interim director of the Generic Pharmaceutical Association. The brand-name makers said they are clarifying the law.

Progressives like Firedoglake’s Jane Hamsher raised this concern during the health reform debate, arguing that an earlier version of the bill included an “evergreening” clause that “grants drug companies a continued monopoly if they make slight changes to the drug (like creating a once-a-day dose where the original product was three times per day), they will never become generics.” In fact, a Federal Trade Commission report released last year found that “the 12- to 14-year regulatory exclusivity period is too long to promote innovation by these firms, particularly since they likely will retain substantial market share after FOB [generic drugs'] entry” and recommended against establishing an exclusivity period. Brand name drugs are “expected to respond and offer competitive discounts to maintain market share and are likely to retain 70 to 90 percent of their market share and will continue to reap substantial profits, even after FOB entry,” the report concluded.

Sen. Sherrod Brown (D-OH) is preparing to send a letter to the FDA laying out his opposition to extending the exclusivity period and gave this statement to the Wonk Room: “As it stands, brand-name pharmaceutical companies will enjoy a 12-year monopoly on life-saving drugs that treat cancer, Multiple Sclerosis, and rheumatoid arthritis before generic alternatives can be sold at affordable prices. But that isn’t enough for them. Now, brand-name pharmaceutical companies are seeking to further delay the development of affordable generic alternatives. To be clear: these biologic drugs are expensive and they are often developed with taxpayer-funded support. By preventing generic competition, American patients suffer and our federal health programs incur additional costs at a time of record deficits.”

The biologics issue was largely overshadowed by the more emotional public option debate, but as Brown suggests, the FDA’s decision could keep life-saving drugs out of reach for thousands of chronically ill patients. During House Energy and Commerce Committee’s mark-up of the health care bill, Rep. Henry Waxman (D-CA) “had pushed to shield biologics for no more than five years — the same amount of time that traditional pharmaceuticals get under the Hatch-Waxman law,” but Rep. Anna Eshoo (D-CA)’s 12-year shield prevailed. President Obama had originally suggested a 7-year exclusivity provision as a possible compromise, before increasing that number to 10, and eventually signing a law with a 12-year exclusivity window.