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A New Approach to Risk-Spreading via Coverage-Expansion Subsidies

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  • John Holahan
  • Len M. Nichols
  • Linda J. Blumberg
  • Yu-Chu Shen

Abstract

The persistently large number of uninsured, roughly 40 million per year since 1993, continues to elicit bipartisan policy interest. Coverage-expansion proposals without mandates, by far the most common since the defeat of the Clinton plan, must address risk-pooling realities in private markets. Insurers have strong financial incentives to segment risks and minimize pooling of heterogeneous risks, and narrow risk-pooling will diminish the adequacy of premium subsidies based on income alone, at least for higher-risk individuals. The current debate over flat tax credits and the non-group market is a case in point (Blumberg, 2001; Center for Studying Health System Change, 2002; Jack Hadley and James D. Reschovsky, 2002). We, along with nine other teams, were asked to develop a proposal that would expand coverage in a large and creative way (see Holahan et al., 2001). The proposal we developed would subsidize low-income individuals and families but also addresses the issue of inefficient and inequitable risk-pooling.

Suggested Citation

  • John Holahan & Len M. Nichols & Linda J. Blumberg & Yu-Chu Shen, 2003. "A New Approach to Risk-Spreading via Coverage-Expansion Subsidies," American Economic Review, American Economic Association, vol. 93(2), pages 277-282, May.
    • Handle: RePEc:aea:aecrev:v:93:y:2003:i:2:p:277-282
    Note: DOI: 10.1257/000282803321947191
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    Citations

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    Cited by:

    1. John F. Cogan & R. Glenn Hubbard & Daniel P. Kessler, 2008. "The Effect of Medicare Coverage for the Disabled on the Market for Private Insurance," NBER Working Papers 14309, National Bureau of Economic Research, Inc.
    2. Richard J. Cebula, 2008. "Small Firm Size and Health Insurance: A Private Enterprise Perspective," Journal of Private Enterprise, The Association of Private Enterprise Education, vol. 24(Fall 2008), pages 51-77.
    3. Cogan, John F. & Hubbard, R. Glenn & Kessler, Daniel P., 2010. "The effect of Medicare coverage for the disabled on the market for private insurance," Journal of Health Economics, Elsevier, vol. 29(3), pages 418-425, May.
    4. Cebula, Richard & Bopp, Anthony, 2007. "The Small Firms Hypothesis and the Percent of U.S. Society without Health Insurance: An Investigation Using Alternative Means Tests," MPRA Paper 56722, University Library of Munich, Germany.
    5. Richard Cebula, 2006. "A Further Analysis of Determinants of Health Insurance Coverage," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 12(3), pages 382-389, August.
    6. repec:kap:iaecre:v:12:y:2006:i:3:p:382-389 is not listed on IDEAS
    7. Cebula, Richard, 2010. "Effects of Health Insurance and Medical Care Inflation on Voluntary Enlistment in the Army: An Empirical Study in the United States," MPRA Paper 51246, University Library of Munich, Germany.
    8. Alexander, Gigi & Cebula, Richard & Saadatmand, Yassamand, 2005. "Determinants of the Percent of the Population Enrolled in HMOs," MPRA Paper 51268, University Library of Munich, Germany.

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