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Lifetime Subsidies in Australian Private Health Insurance Markets with Community Rating

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  • Luke B Connelly

    (Australian Centre for Economic Research on Health (ACERH UQ) and Centre of National Research on Disability, Rehabilitation Medicine (CONROD), The University of Queensland, Mayne Medical School, Herston Road, Herston, QLD 4006, Australia.)

  • H Shelton Brown

    (Management Policy and Community Health, University of Texas School of Public Health, 80 Fort Brown, TX 78520, U.S.A. and Visiting Fellow, ACERH UQ.)

Abstract

This paper considers the problem of inducing low-risk individuals of all ages to buy private health insurance in Australia. Our proposed subsidy scheme improves upon the age-based penalty scheme under the current “Australian Lifetime Cover” (LTC) scheme. We generate an alternative subsidy profile that obviates adverse selection in private health insurance markets with mandated, age-based, community rating. Our proposal is novel in that we generate subsidies that are both risk- and age-specific, based upon actual risk probabilities. The approach we take may prove useful in other jurisdictions where the extant law mandates community rating in private health insurance markets. Furthermore, our approach is useful in jurisdictions that seek to maintain private insurance to complement existing universal public systems. The Geneva Papers (2006) 31, 705–719. doi:10.1057/palgrave.gpp.2510099

Suggested Citation

  • Luke B Connelly & H Shelton Brown, 2006. "Lifetime Subsidies in Australian Private Health Insurance Markets with Community Rating," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 31(4), pages 705-719, October.
    • Handle: RePEc:pal:gpprii:v:31:y:2006:i:4:p:705-719
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    Citations

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    Cited by:

    1. Francesco Paolucci & Amir Shmueli, 2011. "The Introduction of Ex-ante Risk Equalisation in the Australian Private Health Insurance Market: A First Step," Agenda - A Journal of Policy Analysis and Reform, Australian National University, College of Business and Economics, School of Economics, vol. 18(2), pages 71-92.
    2. Connelly, Luke B. & Brown III, H. Shelton, 2008. "Lifetime Fairness? Taxes, Subsidies, Age-Based Penalties, and the Price of Health Insurance in Australia," MPRA Paper 14671, University Library of Munich, Germany.
    3. Connelly, Luke B. & Paolucci, Francesco & Butler, James R.G. & Collins, Paul, 2010. "Risk equalisation and voluntary health insurance markets: The case of Australia," Health Policy, Elsevier, vol. 98(1), pages 3-14, November.
    4. Thomas Buchmueller, 2008. "Community Rating, Entry-Age Rating and Adverse Selection in Private Health Insurance in Australia*," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 33(4), pages 588-609, October.
    5. Francesco Paolucci & James R. G. Butler & Wynand P. M. M. van de Ven, 2011. "Removing Duplication in Public/Private Health Insurance in Australia: Opting Out With Risk-adjusted Subsidies?," Agenda - A Journal of Policy Analysis and Reform, Australian National University, College of Business and Economics, School of Economics, vol. 18(2), pages 49-70.

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