Reinsurance for High Health Costs: Benefits, Limitations, and Alternatives
Government-sponsored reinsurance for individuals with high health costs is a commonly proposed strategy to improve access and affordability in the individual and small-group health insurance markets. While reinsurance may have some benefits, other schemes may be more effective at accomplishing the same goals at lower cost. Reinsurance can be seen as a crude special case of risk-adjusted insurance subsidies. This paper estimates the effect of different reinsurance schemes on insurance premiums and insurers disincentives to enroll potentially high-cost individuals. We find that reinsurance is relatively ineffective at reducing cream-skimming incentives and argue that more sophisticated risk-adjustment schemes are more effective, particularly under community rating with guaranteed issue. Although in the past risk adjustment had been considered too complex to implement in practice, recent experience suggests that it is now feasible, and we argue that incorporation of risk adjustment would strengthen current health insurance reform efforts.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 13 (2010)
Issue (Month): 2 (July)
|Contact details of provider:|| Web page: https://www.degruyter.com|
|Order Information:||Web: https://www.degruyter.com/view/j/fhep|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Thomas Buchmueller & John Dinardo, 2002.
"Did Community Rating Induce an Adverse Selection Death Spiral? Evidence from New York, Pennsylvania, and Connecticut,"
American Economic Review,
American Economic Association, vol. 92(1), pages 280-294, March.
- 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.
- van de Ven, Wynand P. M. M. & van Vliet, Rene C. J. A. & Schut, Frederik T. & van Barneveld, Erik M., 2000. "Access to coverage for high-risks in a competitive individual health insurance market: via premium rate restrictions or risk-adjusted premium subsidies?," Journal of Health Economics, Elsevier, vol. 19(3), pages 311-339, May.
- repec:mpr:mprres:4253 is not listed on IDEAS
- Katherine Swartz, 2003. "Reinsuring Risk to Increase Access to Health Insurance," American Economic Review, American Economic Association, vol. 93(2), pages 283-287, May.
- Deborah Chollet, "undated". "The Role of Reinsurance in State Efforts to Expand Coverage," Mathematica Policy Research Reports 6a1891751984484ba20b0719c, Mathematica Policy Research.
- Ellis, Randall P. & McGuire, Thomas G., 2007. "Predictability and predictiveness in health care spending," Journal of Health Economics, Elsevier, vol. 26(1), pages 25-48, January.
- Randall P. Ellis & Thomas G. McGuire, 2006. "Predictability and Predictiveness in Health Care Spending," Boston University - Department of Economics - Working Papers Series WP2006-001, Boston University - Department of Economics.
- Brigitte C. Madrian, 1994. "Employment-Based Health Insurance and Job Mobility: Is there Evidence of Job-Lock?," The Quarterly Journal of Economics, Oxford University Press, vol. 109(1), pages 27-54.
- Brigitte C. Madrian, 1993. "Employment-Based Health Insurance and Job Mobility: Is There Evidence of Job-Lock?," NBER Working Papers 4476, National Bureau of Economic Research, Inc.