Recently, private health insurance rates have declined in many countries. In places requiring community rating in their health insurance premiums, a major cause is age-based adverse selection. However, even in countries without community rating, a de facto type of partial community rating tends to occur. In this note, a modified version of Pauly et al.'s guaranteed renewability model, which addresses the problem of age-based adverse selection (Pauly et al., 1995) is presented. Their model is extended from three to 35 periods. Also, probabilities are allowed to increase by age for low-risk types using actual age-based probabilities. This extension of their work shows that private health insurance contracts available stray far from optimal contracts that deal with age-based adverse selection. This suggests that government actions to affect private insurance options are warranted. © 2005 Taylor & Francis Group Ltd.
Market failure in long-term private health insurance markets: A proposed solution / Brown Iii, H. Shelton; Connelly, LUKE BRIAN. - In: APPLIED ECONOMICS LETTERS. - ISSN 1350-4851. - ELETTRONICO. - 12:5(2005), pp. 281-284. [10.1080/13504850500041944]
Market failure in long-term private health insurance markets: A proposed solution
Connelly, Luke B.
2005
Abstract
Recently, private health insurance rates have declined in many countries. In places requiring community rating in their health insurance premiums, a major cause is age-based adverse selection. However, even in countries without community rating, a de facto type of partial community rating tends to occur. In this note, a modified version of Pauly et al.'s guaranteed renewability model, which addresses the problem of age-based adverse selection (Pauly et al., 1995) is presented. Their model is extended from three to 35 periods. Also, probabilities are allowed to increase by age for low-risk types using actual age-based probabilities. This extension of their work shows that private health insurance contracts available stray far from optimal contracts that deal with age-based adverse selection. This suggests that government actions to affect private insurance options are warranted. © 2005 Taylor & Francis Group Ltd.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.