The COMPARE microsimulation model and the U.S. Affordable Care Act

In anticipation of upcoming health care legislation, the RAND Corporation developed a microsimulation model to forecast the responses of individuals, families and firms to such legislation. The COMPARE (COMPrehensive Assessment of Reform Efforts) microsimulation has been used to estimate the impact of major policy changes in the United States, such as the Affordable Care Act on uninsurance rates, participation in the group and the non-group insurance markets, firms' insurance offer rates, enrollment in public programs such as Medicaid and CHIP, private insurance premiums and costs to the federal and state governments. The team selected utility maximization to model behaviors, a methodology that is better suited than spreadsheet or econometric models to predict how individuals, households and firms will respond to wholly new insurance options, such as the Health Insurance Marketplace and the Small Business Health Options Program (SHOP) Exchanges created by the Affordable Care Act. Modeling can be done both at the national and at a state-specific levels. In this paper we provide a summary of COMPARE's basic principles, its nationally representative databases, its utility-maximization behavioral models, and how we have used COMPARE to estimate the consequences of the Affordable Care Act.