Private Health Insurance Exchanges: Early Evidence and Implications for the Future (original) (raw)
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The RAND Health Insurance Experiment, Three Decades Later
Journal of Economic Perspectives, 2013
n the voluminous academic literature and public policy discourse on how health n the voluminous academic literature and public policy discourse on how health insurance affects medical spending, the famous RAND Health Insurance Experi-insurance affects medical spending, the famous RAND Health Insurance Experiment stands apart. Between 1974 and 1981, the RAND experiment provided health ment stands apart. Between 1974 and 1981, the RAND experiment provided health insurance to more than 5,800 individuals from about 2,000 households in six different insurance to more than 5,800 individuals from about 2,000 households in six different locations across the United States, a sample designed to be representative of families locations across the United States, a sample designed to be representative of families with adults under the age of 62. The experiment randomly assigned the families to with adults under the age of 62. The experiment randomly assigned the families to health insurance plans with different levels of cost sharing, ranging from full coverage health insurance plans with different levels of cost sharing, ranging from full coverage ("free care") to plans that provided almost no coverage for the fi rst approximately ("free care") to plans that provided almost no coverage for the fi rst approximately 4,000(in2011dollars)thatwereincurredduringtheyear.TheRANDinvestigators4,000 (in 2011 dollars) that were incurred during the year. The RAND investigators 4,000(in2011dollars)thatwereincurredduringtheyear.TheRANDinvestigators4,000 (in 2011 dollars) that were incurred during the year. The RAND investigators were pioneers in what was then relatively novel territory for the social sciences, both in were pioneers in what was then relatively novel territory for the social sciences, both in the conduct and analysis of randomized experiments and in the economic analysis of the conduct and analysis of randomized experiments and in the economic analysis of moral hazard in the context of health insurance. moral hazard in the context of health insurance.
Health Affairs, 2008
This paper presents a framework for universal health insurance that builds on the current U.S. mixed private-public system by expanding group coverage through private markets and publicly sponsored insurance. This Building Blocks approach includes a new national insurance "connector" that offers small businesses and individuals a structured choice of a Medicare-like public option and private plans. Other features include an individual mandate, required employer contributions, Medicaid/State Children's Health Insurance Program (SCHIP) expansion, and tax credits to assure affordability. The paper estimates coverage and costs, and assesses the approach. Our findings indicate that the framework could reach near-universal coverage with little net increase in national health spending. 6 4 6 M a y / J u n e 2 0 0 8 F o r m u l a s F o r C o m p r o m i s e
Individual insurance: health insurers try to tap potential market growth
Research brief, 2009
Individual insurance is the only source of health coverage for people without access to employer-sponsored insurance or public insurance. Individual insurance traditionally has been sought by older, sicker individuals who perceive the need for insurance more than younger, healthier people. The attraction of a sicker population to the individual market creates adverse selection, leading insurers to employ medical underwriting--which most states allow--to either avoid those with the greatest health needs or set premiums more reflective of their expected medical use. Recently, however, several factors have prompted insurers to recognize the growth potential of the individual market: a declining proportion of people with employer-sponsored insurance, a sizeable population of younger, healthier people forgoing insurance, and the likelihood that many people receiving subsidies to buy insurance under proposed health insurance reforms would buy individual coverage. Insurers are pursuing sev...
Private Voluntary Health Insurance in Developing Countries
2004
This chapter describes how economic theory (and experience) of the demand for insurance predicts that risk-averse individuals purchase coverage if available at so-called fair premiums, which amount to no more than the expected value of the loss to be covered. In the case of health, additional fi nancial means (provided by coverage) may be even more important when a person is ill than when he or she is healthy. If so, demand for health insurance, even in low-income countries, could be high. Every insurer needs to charge a "loading" for administrative expense, compensation for risk, and profi t (in the case of a public insurer, the loading amounts to the effi ciency loss caused by taxation needed to finance the insurer's operations). Therefore, the behavior of health insurance suppliers becomes of crucial importance. The loading contained in their premiums (or contributions) is just one of several supply dimensions, which include comprehensiveness of benefits, amount of risk selection effort, degree of vertical integration with health services providers, and degree of seller concentration in the market. This chapter addresses these dimensions of supply and the powerful effect on them of moral hazard (the tendency of consumers to underinvest in prevention, choose the most intensive treatment alternative, and push for application of the latest medical technology). In the presence of marked moral hazard effects, health insurers are well advised to include only a few items in their benefi t list, because each of these items tends to increase in price, quantity, and hence expenditure. Moreover, premium regulation induces risk selection efforts. If allowed to charge contributions according to true risk, health insurers will set premiums such that high and low risks yield the same contribution margin on expectation. In that event, risk selection ("cream skimming") is not worthwhile. These phenomena hold not only for private health insurance in low-income countries but also for community-based and public health insurance. Because little empirical data on the supply of health insurance exist, case studies, mainly of low-income countries, are used to illustrate theoretical predictions. On the whole, the limited empirical evidence suggests that the theory developed in this chapter may be suffi ciently descriptive to provide some guidelines for policy.
Private Voluntary Health Insurance in Development
2006
This chapter describes how economic theory (and experience) of the demand for insurance predicts that risk-averse individuals purchase coverage if available at so-called fair premiums, which amount to no more than the expected value of the loss to be covered. In the case of health, additional fi nancial means (provided by coverage) may be even more important when a person is ill than when he or she is healthy. If so, demand for health insurance, even in low-income countries, could be high. Every insurer needs to charge a "loading" for administrative expense, compensation for risk, and profi t (in the case of a public insurer, the loading amounts to the effi ciency loss caused by taxation needed to finance the insurer's operations). Therefore, the behavior of health insurance suppliers becomes of crucial importance. The loading contained in their premiums (or contributions) is just one of several supply dimensions, which include comprehensiveness of benefits, amount of risk selection effort, degree of vertical integration with health services providers, and degree of seller concentration in the market. This chapter addresses these dimensions of supply and the powerful effect on them of moral hazard (the tendency of consumers to underinvest in prevention, choose the most intensive treatment alternative, and push for application of the latest medical technology). In the presence of marked moral hazard effects, health insurers are well advised to include only a few items in their benefi t list, because each of these items tends to increase in price, quantity, and hence expenditure. Moreover, premium regulation induces risk selection efforts. If allowed to charge contributions according to true risk, health insurers will set premiums such that high and low risks yield the same contribution margin on expectation. In that event, risk selection ("cream skimming") is not worthwhile. These phenomena hold not only for private health insurance in low-income countries but also for community-based and public health insurance. Because little empirical data on the supply of health insurance exist, case studies, mainly of low-income countries, are used to illustrate theoretical predictions. On the whole, the limited empirical evidence suggests that the theory developed in this chapter may be suffi ciently descriptive to provide some guidelines for policy.
RePEc: Research Papers in Economics, 2006
It was established as a UTS Centre in February, 2002. The Centre aims to contribute to the development and application of health economics and health services research through research, teaching and policy support. CHERE's research program encompasses both the theory and application of health economics. The main theoretical research theme pursues valuing benefits, including understanding what individuals value from health and health care, how such values should be measured, and exploring the social values attached to these benefits. The applied research focuses on economic and the appraisal of new programs or new ways of delivering and/or funding services. CHERE's teaching includes introducing clinicians, health services managers, public health professionals and others to health economic principles. Training programs aim to develop practical skills in health economics and health services research. Policy support is provided at all levels of the health care system by undertaking commissioned projects, through the provision of formal and informal advice as well as participation in working parties and committees.
Health Economics, 2008
The Centre aims to contribute to the development and application of health economics and health services research through research, teaching and policy support. CHERE's research program encompasses both the theory and application of health economics. The main theoretical research theme pursues valuing benefits, including understanding what individuals value from health and health care, how such values should be measured, and exploring the social values attached to these benefits. The applied research focuses on economic and the appraisal of new programs or new ways of delivering and/or funding services. CHERE's teaching includes introducing clinicians, health services managers, public health professionals and others to health economic principles. Training programs aim to develop practical skills in health economics and health services research. Policy support is provided at all levels of the health care system by undertaking commissioned projects, through the provision of formal and informal advice as well as participation in working parties and committees.
Health Insurance in the United States: Failure of Private and Multi-Payer Financing
Health Insurance
Since the 1960s, the United States has subscribed to a business model of health care, largely for-profit with most private insurers on a mission to maximize their own revenues. Most insurers use cost sharing through deductibles and copayments based on the principle that enrollees will overuse health care services unless they have enough “skin in the game.” As health care has been corporatized within a medical-industrial complex, even public insurers such as Medicare and Medicaid have been privatized with the same mission. Employer-sponsored health insurance has been the core of insurance in the U.S. since World War II, but has become unaffordable for employers and employees alike. This article brings historical perspective to how health insurance has been transformed from its not-for-profit origins in the 1930s, how it has become unaffordable in recent decades as it costs more and covers less, and how our multi-payer financing system has failed the public interest. Reform alternativ...
Some demographic issues affecting private health insurance
Australian Health Review, 2004
There will be significant changes in the demography of persons with Private Health Insurance (PHI). Two methods of projecting PHI coverage are discussed in this paper. The first assumes the only factors affecting PHI coverage are demographic change and mortality, and facilitates comparisons between actual and projected PHI coverage. The second projects the percentage of the population insured in each five year age cohort, and makes allowance for changes in PHI coverage due to all factors. Demographic change will increase Registered Health Benefit Organization (RHBO) premiums by 1.7% per annum. The role of these projections in analysing the effect of future premium increases on PHI retention rates is also discussed.