One of the valid concerns the health insurance industry has with healthcare reform is that the penalties in the individual mandate are so small, healthy people will simply wait until they are sick before buying coverage — a formula for adverse selection. Matt Perry of Wachovia notes, however, that the Senate bill helps mitigate the risk:
The new Senate bill would create an annual open enrollment period for the purchase of insurance and would not allow purchase of insurance outside this period, save for exceptions. This would mitigate the adverse selection problem by not allowing people to wait until they’re sick to buy coverage.
The House bill contains a similar provision.