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

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  • 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.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:pubeco:v:93:y:2009:i:1-2:p:264-279
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    References listed on IDEAS

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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, 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.
    3. Hanming Fang & Michael P. Keane & Dan Silverman, 2008. "Sources of Advantageous Selection: Evidence from the Medigap Insurance Market," Journal of Political Economy, University of Chicago Press, vol. 116(2), pages 303-350, April.
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    5. 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.
    6. repec:rje:randje:v:37:y:2006:i:4:p:783-798 is not listed on IDEAS
    7. 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.
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    Cited by:

    1. Amelie C. Wuppermann, 2017. "Private Information in Life Insurance, Annuity, and Health Insurance Markets," Scandinavian Journal of Economics, Wiley Blackwell, vol. 119(4), pages 855-881, October.
    2. Li, Yajuan & Palma, Marco A. & Towne, Samuel, 2017. "Does Health Insurance Provision Improve Self-Employment and Entrepreneurship? Evidence from State Insurance Mandates," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258399, Agricultural and Applied Economics Association.
    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. Ko, Hansoo, 2020. "Moral hazard effects of supplemental private health insurance in Korea," Social Science & Medicine, Elsevier, vol. 265(C).
    5. Bradley T. Heim & Lang Kate Yang, 2017. "The impact of the Affordable Care Act on self‐employment," Health Economics, John Wiley & Sons, Ltd., vol. 26(12), pages 256-273, December.
    6. Padmaja Ayyagari, 2019. "Health Insurance and Early Retirement Plans: Evidence from the Affordable Care Act," American Journal of Health Economics, University of Chicago Press, vol. 5(4), pages 533-560, Fall.
    7. H. E. Frech & Michael P. Smith, 2015. "Anatomy of a Slow-Motion Health Insurance Death Spiral," North American Actuarial Journal, Taylor & Francis Journals, vol. 19(1), pages 60-72, January.
    8. 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.
    9. Jeffrey Clemens, 2015. "Regulatory Redistribution in the Market for Health Insurance," American Economic Journal: Applied Economics, American Economic Association, vol. 7(2), pages 109-134, April.
    10. Lieber, Ethan M.J., 2018. "Does health insurance coverage fall when nonprofit insurers become for-profits?," Journal of Health Economics, Elsevier, vol. 57(C), pages 75-88.
    11. Peter, Richard & Richter, Andreas & Thistle, Paul, 2017. "Endogenous information, adverse selection, and prevention: Implications for genetic testing policy," Journal of Health Economics, Elsevier, vol. 55(C), pages 95-107.
    12. Bradley T. Heim & Ithai Z. Lurie, 2014. "DID REFORM OF THE NON‐GROUP HEALTH INSURANCE MARKET AFFECT THE DECISION TO BE SELF‐EMPLOYED? EVIDENCE FROM STATE REFORMS IN THE 1990s," Health Economics, John Wiley & Sons, Ltd., vol. 23(7), pages 841-860, July.
    13. Wuppermann, Amelie Catherine, 2011. "Empirical Essays in Health and Education Economics," Munich Dissertations in Economics 13187, University of Munich, Department of Economics.
    14. Bradley Heim & Ithai Lurie, 2014. "Does health reform affect self-employment? Evidence from Massachusetts," Small Business Economics, Springer, vol. 43(4), pages 917-930, December.

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