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Health Insurance Mandates in a Model with Consumer Bankruptcy

Listed author(s):
  • Gilad Sorek
  • David Benjamin

We study insurance take-up choices by consumers who face medical-expense and income risks, knowing they can default on medical bills by filing bankruptcy. For a given bankruptcy system we explore total and distributional welfare effects of health insurance mandates, compared with pre-mandates market equilibrium. We consider different combinations of premium-subsides and out-of-insurance penalties, confining attention to budgetary neutral policies. We show that when insurance mandates are enforced through penalties only, the efficient take-up level may be incomplete. However, if mandates are supported also with premium subsidies full insurance coverage is efficient and can be also Pareto improving. Such policies are consistent with the incentives structure set in the ACA for insurance take-up.

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File URL: http://cla.auburn.edu/econwp/Archives/2015/2015-05.pdf
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Paper provided by Department of Economics, Auburn University in its series Auburn Economics Working Paper Series with number auwp2015-05.

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Date of creation: May 2015
Handle: RePEc:abn:wpaper:auwp2015-05
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Web page: http://cla.auburn.edu/economics/

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  8. Jonathan Gruber, 2011. "The Impacts of the Affordable Care Act: How Reasonable Are the Projections?," NBER Working Papers 17168, National Bureau of Economic Research, Inc.
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  13. Scott E. Harrington, 2010. "The Health Insurance Reform Debate," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 77(1), pages 5-38.
  14. Summers, Lawrence H, 1989. "Some Simple Economics of Mandated Benefits," American Economic Review, American Economic Association, vol. 79(2), pages 177-183, May.
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  16. Mazumder, Bhashkar & Miller, Sarah, 2014. "The Effects of the Massachusetts Health Reform on Financial Distress," Working Paper Series WP-2014-1, Federal Reserve Bank of Chicago.
  17. Neale Mahoney, 2015. "Bankruptcy as Implicit Health Insurance," American Economic Review, American Economic Association, vol. 105(2), pages 710-746, February.
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