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Community rating and the market for private non-group health insurance

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Author Info

  • Lo Sasso, Anthony T.
  • Lurie, Ithai Z.

Abstract

Prior research on adverse selection in health insurance markets has found only mixed evidence for adverse selection in group settings. We examine the impact of state community rating regulations enacted in the 1990s, which greatly limited insurers' ability to risk rate premiums, to determine if adverse selection is more evident in non-group insurance markets. Using data from large, national surveys we find evidence of a shift to a less healthy pool of non-group enrollees as a consequence of community rating. Community rating made healthy people 20 to 60% less likely to be insured by non-group health insurance; in addition, we found evidence that young and healthy people were 20 to 30% more likely to be uninsured as a result of community rating. We also find evidence that individuals in poor health were 35 to 50% more likely to be insured in the non-group market, but only limited evidence suggesting that persons in poor health were less likely to be uninsured. Our results are further supported by findings suggesting that non-group enrollees were sicker as a result of the community rating laws. Lastly, we find evidence suggesting that HMO penetration in the non-group market increased disproportionately in states that implemented community rating relative to states that did not.

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File URL: http://www.sciencedirect.com/science/article/B6V76-4SYTC61-1/2/5513c332b9cf6e51d64b81e4f409d2e3
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Bibliographic Info

Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 93 (2009)
Issue (Month): 1-2 (February)
Pages: 264-279

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Handle: RePEc:eee:pubeco:v:93:y:2009:i:1-2:p:264-279

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Web page: http://www.elsevier.com/locate/inca/505578

Related research

Keywords: Adverse selection Community rating Individual health insurance Uninsurance Insurance regulation;

References

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  1. Pierre‐André Chiappori & Bruno Jullien & Bernard Salanié & François Salanié, 2006. "Asymmetric information in insurance: general testable implications," RAND Journal of Economics, RAND Corporation, vol. 37(4), pages 783-798, December.
  2. Thomas Buchmueller & John DiNardo, 1999. "Did Community Rating Induce an Adverse Selection Death Spiral? Evidencefrom New York, Pennsylvania and Connecticut," NBER Working Papers 6872, National Bureau of Economic Research, Inc.
  3. Thomas C. Buchmueller, 2005. "Health Insurance Reform and HMO Penetration in the Small Group Market," NBER Working Papers 11446, National Bureau of Economic Research, Inc.
  4. Fang, Hanming & Keane, Michael & Silverman, Dan, 2006. "Sources of Advantageous Selection: Evidence from the Medigap Insurance Market," Working Papers 17, Yale University, Department of Economics.
  5. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-in-Differences Estimates?," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 249-275, February.
  6. Ilayperuma Simon, Kosali, 2005. "Adverse selection in health insurance markets? Evidence from state small-group health insurance reforms," Journal of Public Economics, Elsevier, vol. 89(9-10), pages 1865-1877, September.
  7. Amy Finkelstein & Kathleen McGarry, 2006. "Multiple Dimensions of Private Information: Evidence from the Long-Term Care Insurance Market," American Economic Review, American Economic Association, vol. 96(4), pages 938-958, September.
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Cited by:
  1. Thomas C. Buchmueller & Alan C. Monheit, 2009. "Employer-Sponsored Health Insurance and the Promise of Health Insurance Reform," NBER Working Papers 14839, National Bureau of Economic Research, Inc.
  2. Jeffrey Clemens, 2012. "Regulatory Redistribution in the Market for Health Insurance," Discussion Papers 11-011, Stanford Institute for Economic Policy Research.
  3. Heim, Bradley T. & Lurie, Ithai Z., 2010. "The effect of self-employed health insurance subsidies on self-employment," Journal of Public Economics, Elsevier, vol. 94(11-12), pages 995-1007, December.
  4. Wuppermann, Amelie Catherine, 2011. "Empirical Essays in Health and Education Economics," Munich Dissertations in Economics 13187, University of Munich, Department of Economics.

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