Minimum Standards and Insurance Regulation: Evidence from the Medigap Market
This paper examines the consequences of imposing binding minimum standards on the market for voluntary private health insurance for the elderly. Theoretically, the effect of these standards on insurance coverage and on welfare is ambiguous. I find robust evidence of a substantial decline in insurance associated with the minimum standards. The central estimates suggest that the standards are associated with an 8 percentage point (25 percent) decrease in the proportion of the population with coverage in the affected market; I find no evidence of substitution to other, unregulated sources of insurance coverage. Additional evidence suggests that the minimum standards are also associated with reduced coverage of non-mandated benefits among the insured. The empirical results are most consistent with a model of the effect of minimum standards on insurance markets with adverse selection, and suggest that adverse selection exacerbates the potential for unintended negative consequences of minimum standards. The final section of the paper considers the welfare implications of the changes in risk bearing associated with the minimum standards. The results suggest that the imposition of these standards was, even under relatively conservative assumptions, welfare reducing on net.
|Date of creation:||May 2002|
|Publication status:||published as Finkelstein, Amy. "Minimum Standards, Insurance Regulation And Adverse Selection: Evidence From The Medigap Market," Journal of Public Economics, 2004, v88(12,Dec), 2515-2547.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
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.:
- Gruber, J., 1992.
"State Mandated Benefits and Employer Provided Health Insurance,"
92-18, Massachusetts Institute of Technology (MIT), Department of Economics.
- Jonathan Gruber, 1992. "State Mandated Benefits and Employer Provided Health Insurance," NBER Working Papers 4239, National Bureau of Economic Research, Inc.
- Martin Feldstein & Jonathan Gruber, 1995. "A Major Risk Approach to Health Insurance Reform," NBER Chapters,in: Tax Policy and the Economy, Volume 9, pages 103-130 National Bureau of Economic Research, Inc.
- Martin Feldstein & Jonathan Gruber, 1994. "A Major Risk Approach to Health Insurance Reform," NBER Working Papers 4852, National Bureau of Economic Research, Inc.
- Halpern, Janice & Hausman, Jerry A., 1986. "Choice under uncertainty: A model of applications for the social security disability insurance program," Journal of Public Economics, Elsevier, vol. 31(2), pages 131-161, November.
- Janice Halpern & Jerry A. Hausman, 1985. "Choice Under Uncertainty: A Model of Applications for the Social Security Disability Insurance Program," NBER Working Papers 1690, National Bureau of Economic Research, Inc.
- Encinosa, William, 2001. "A comment on Neudeck and Podczeck's "adverse selection and regulation in health insurance markets"," Journal of Health Economics, Elsevier, vol. 20(4), pages 667-673, July.
- Cutler, David M. & Zeckhauser, Richard J., 2000. "The anatomy of health insurance," Handbook of Health Economics,in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 11, pages 563-643 Elsevier.
- David M. Cutler & Richard J. Zeckhauser, 1999. "The Anatomy of Health Insurance," NBER Working Papers 7176, National Bureau of Economic Research, Inc.
- Joseph P. Newhouse, 1992. "Medical Care Costs: How Much Welfare Loss?," Journal of Economic Perspectives, American Economic Association, vol. 6(3), pages 3-21, Summer.
- Uri Ronnen, 1991. "Minimum Quality Standards, Fixed Costs, and Competition," RAND Journal of Economics, The RAND Corporation, vol. 22(4), pages 490-504, Winter.
- Neudeck, Werner & Podczeck, Konrad, 1996. "Adverse selection and regulation in health insurance markets," Journal of Health Economics, Elsevier, vol. 15(4), pages 387-408, August.
- Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-In-Differences Estimates?," The Quarterly Journal of Economics, Oxford University Press, vol. 119(1), pages 249-275.
- Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2002. "How Much Should We Trust Differences-in-Differences Estimates?," NBER Working Papers 8841, National Bureau of Economic Research, Inc.
- Brigitte C. Madrian & Dennis F. Shea, 2001. "The Power of Suggestion: Inertia in 401(k) Participation and Savings Behavior," The Quarterly Journal of Economics, Oxford University Press, vol. 116(4), pages 1149-1187.
- Brigitte C. Madrian & Dennis F. Shea, 2000. "The Power of Suggestion: Inertia in 401(k) Participation and Savings Behavior," NBER Working Papers 7682, National Bureau of Economic Research, Inc.
- George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 84(3), pages 488-500.
- Bridgitte C. Madrian, 1994. "The Effect of Health Insurance on Retirement," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(1), pages 181-252. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:8917. See general information about how to correct material in RePEc.
If references are entirely missing, you can add them using this form.