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Regulatory Redistribution in the Market for Health Insurance

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  • Jeffrey Clemens

    () (Stanford University)

Abstract

In the early 1990s, several US states enacted community rating regulations to equalize the private health insurance premiums paid by the healthy and the sick. Consistent with severe adverse selection pressures, their private coverage rates fell by 8-11 percentage points more than rates in comparable markets over subsequent years. By the early 2000s, however, most of these losses had been recovered. The recoveries were coincident with substantial public insurance expansions (for unhealthy adults, pregnant women, and children) and were largest in the markets where public coverage of unhealthy adults expanded most. The analysis highlights an important linkage between the incidence of public insurance programs and redistributive regulations. When targeted at the sick, public insurance expansions can relieve the distortions associated with premium regulations, potentially crowding in private coverage. Such expansions will look particularly attractive to participants in community-rated insurance markets when a federal government shares in the cost of local public insurance programs.

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Bibliographic Info

Paper provided by Stanford Institute for Economic Policy Research in its series Discussion Papers with number 11-011.

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Date of creation: Apr 2012
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Handle: RePEc:sip:dpaper:11-011

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Related research

Keywords: Community Rating; Medicaid; Health Insurance; Social Insurance; Redistribution; Fiscal Competition;

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References

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  1. Davidoff, Amy & Blumberg, Linda & Nichols, Len, 2005. "State health insurance market reforms and access to insurance for high-risk employees," Journal of Health Economics, Elsevier, vol. 24(4), pages 725-750, July.
  2. 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.
  3. Baicker, Katherine & Clemens, Jeffrey & Singhal, Monica, 2012. "The rise of the states: U.S. fiscal decentralization in the postwar period," Journal of Public Economics, Elsevier, vol. 96(11), pages 1079-1091.
  4. Amy Finkelstein & James Poterba & Casey Rothschild, 2006. "Redistribution by Insurance Market Regulation: Analyzing a Ban on Gender-Based Retirement Annuities," NBER Working Papers 12205, National Bureau of Economic Research, Inc.
  5. Casey Rothschild, 2011. "The Efficiency of Categorical Discrimination in Insurance Markets," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 78(2), pages 267-285, 06.
  6. Lo Sasso, Anthony T. & Lurie, Ithai Z., 2009. "Community rating and the market for private non-group health insurance," Journal of Public Economics, Elsevier, vol. 93(1-2), pages 264-279, February.
  7. Gruber, Jonathan & Simon, Kosali, 2008. "Crowd-out 10 years later: Have recent public insurance expansions crowded out private health insurance?," Journal of Health Economics, Elsevier, vol. 27(2), pages 201-217, March.
  8. Marquis, M. Susan & Long, Stephen H., 1995. "Worker demand for health insurance in the non-group market," Journal of Health Economics, Elsevier, vol. 14(1), pages 47-63, May.
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Cited by:
  1. Svetlana Pashchenko & Ponpoje Porapakkarm, 2012. "Online Appendix to "Quantitative Analysis of Health Insurance Reform: Separating Regulation from Redistribution"," Technical Appendices 11-70, Review of Economic Dynamics.
  2. Pashchenko, Svetlana & Porapakkarm, Ponpoje, 2012. "Quantitative analysis of health insurance reform: separating regulation from redistribution," MPRA Paper 41193, University Library of Munich, Germany.

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