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Remedies for Sick Insurance

  • Daniel L. McFadden
  • Carlos E. Noton
  • Pau Olivella

This expository paper describes the factors that contribute to failure of health insurance markets, and the regulatory mechanisms that have been and can be used to combat these failures. Standardized contracts and creditable coverage mandates are discussed, along with premium support, enrollment mandates, guaranteed issue, and risk adjustment, as remedies for selection-related market damage. An overall conclusion of the paper is that the design and management of creditable coverage mandates are likely to be key determinants of the performance of the health insurance exchanges that are a core provision of the PPACA of 2010. Enrollment mandates, premium subsidies, and risk adjustment can improve the stability and relative efficiency of the exchanges, but with carefully designed creditable coverage mandates are not necessarily critical for their operation.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17938.

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Date of creation: Mar 2012
Date of revision:
Handle: RePEc:nbr:nberwo:17938
Note: AG
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