Unbiased Analysis of Today's Healthcare Issues
Adverse selection is a classic problem in health insurance. If you offer insurance to individuals, you may want to set the premiums based on the average price of the population you plan to cover. At this price, however, the sickest patients are the ones most likely to take up insurance and the health insurer’s expenses…
Healthy, high-income people in Germany choose private health insurance. Sick, low-income people generally choose public insurance through Germany’s sickness funds. It shouldn’t be surprising risk selection between public and private insurance occurs in Germany. Here’s why: While public premiums [in Germany] are subject to community rating, private premiums are risk rated. Moreover, public premiums are…
Medicare beneficiaries have the option to enroll in private plans to have them operate their benefits rather than use the tradiational Medicare Fee-for-services (FFS) program. Medicare pays these private plans, known as Medicare Advantage (MA) plans, premiums based on the health status of their enrollees. Medicare uses a risk score to measure beneficiary health status.…
As of 2011, in 45 out of 51 States (including DC) insurers can choose not to provide applicants with insurance coverage. Requiring insurers to offer coverage to all individuals is known in insurance lingo as “guaranteed issue.” One question is why don’t insurance companies just charge high-risk individuals higher premiums? Why would they want to…
Many individuals are uninsureable. Their pre-existing conditions indicate that they are so risky either: i) no insurance company would cover them or ii) the premiums would be so high that the individual could not afford them. To insure some of these people, many states have set up high-risk health insurance pools (HRP). Currently, all these…
In Germany, poor and middle class individuals must use public insurance, but well-off Germans can choose between using public and private insurance. “In Germany, about 90% of the population is publicly insured (Colombo & Tapay, 2004). Buying public insurance is mandatory for dependent employees with a regular employment contract as long as their income does…
Deciding whether to get tested for genetic diseases is a choice many people will face in the coming years. By knowing whether or not you are more likely to develop a given disease, you may be able to change your health habits or seek earlier medical treatment. In addition, genetic testing provides additional knowledge useful…
Cohen and Siegelman (2009) document empirical research on adverse selection in 5 markets: i) automobile insurance, ii) annuities and life insurance, iii) long term care, iv) crop insurance, and v) health insurance. The presence of adverse selection varies not only across markets, but also within markets depending on the product sold and the type of…
“…individuals who carry the [Huntington Disease] genetic mutation are up to 5 times as likely as the general population to own long-term care insurance…relatively limited increases in genetic information may threaten the viability of private long-term care insurance.” Oster et al. (2009) “Genetic Adverse Selection: Evidence from Long-Term Care Insurance and Huntington Disease” NBER Working…
Adverse Selection. The firm wants to attract healthy individuals at all ages. Gym membership may be observable, but it is difficult to observe frequency of gym visits. By advertising at 24-hour Fitness, Kaiser Permanente’s ads have the strongest effect on those who go to the gym most frequently. If fitness enthusiasts decide to enroll at…