In the last few decades, private health insurance rates have declined in many countries. In countries and states with community rating, a major cause is adverse selection. In order to address age-based adverse selection, Australia has recently begun a novel approach which imposes stiff penalties for buying private insurance later in life, when expected costs are higher. In this paper, we analyze Australia's Lifetime Cover in the context of a modified version of the Rothschild-Stiglitz insurance model (Rothschild and Sliglitz, 1976).We allow empirically-based probabilities to increase by age for low-risk types. The model highlights the shortcomings of the Australian plan. Based on empirically-based probabilities of illness, we prredict that Lifetime Cover will not arrest adverse selection. The model has many policy implications for government regulation encouraging long-term health coverage. © 2005 Springer Science+Business Media, Inc.
Brown Iii, H.S., Connelly, L.B. (2005). Lifetime cover in private insurance markets. INTERNATIONAL JOURNAL OF HEALTH CARE FINANCE AND ECONOMICS, 5(1), 75-88 [10.1007/s10754-005-6602-6].
Lifetime cover in private insurance markets
Connelly, Luke B.
2005
Abstract
In the last few decades, private health insurance rates have declined in many countries. In countries and states with community rating, a major cause is adverse selection. In order to address age-based adverse selection, Australia has recently begun a novel approach which imposes stiff penalties for buying private insurance later in life, when expected costs are higher. In this paper, we analyze Australia's Lifetime Cover in the context of a modified version of the Rothschild-Stiglitz insurance model (Rothschild and Sliglitz, 1976).We allow empirically-based probabilities to increase by age for low-risk types. The model highlights the shortcomings of the Australian plan. Based on empirically-based probabilities of illness, we prredict that Lifetime Cover will not arrest adverse selection. The model has many policy implications for government regulation encouraging long-term health coverage. © 2005 Springer Science+Business Media, Inc.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.