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Regulatory Redistribution in the Market for Health Insurance

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  • Jeffrey Clemens

Abstract

Community-rating regulations equalize the insurance premiums faced by the healthy and the unhealthy. Intended reductions in the unhealthy's premiums can be undone, however, if the healthy forgo coverage. The severity of this adverse selection problem hinges largely on how health care costs are distributed across market participants. Theoretically, I show that Medicaid expansions can combat adverse selection by removing high cost individuals from the relevant risk pool. Empirically, I find that private coverage rates improved significantly in community-rated markets when states expanded Medicaid's coverage of relatively unhealthy adults. The effects of these health policy instruments are fundamentally linked. (JEL G22, G28, H51, H53, I13, I18, I38)

Suggested Citation

  • Jeffrey Clemens, 2015. "Regulatory Redistribution in the Market for Health Insurance," American Economic Journal: Applied Economics, American Economic Association, vol. 7(2), pages 109-134, April.
    • Handle: RePEc:aea:aejapp:v:7:y:2015:i:2:p:109-34
    Note: DOI: 10.1257/app.20130169
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    Cited by:

    1. Natalia Guerrero & Oswaldo Molina & Diego Winkelried, 2020. "Conditional cash transfers, spillovers, and informal health care: Evidence from Peru," Health Economics, John Wiley & Sons, Ltd., vol. 29(2), pages 111-122, February.
    2. Frean, Molly & Gruber, Jonathan & Sommers, Benjamin D., 2017. "Premium subsidies, the mandate, and Medicaid expansion: Coverage effects of the Affordable Care Act," Journal of Health Economics, Elsevier, vol. 53(C), pages 72-86.
    3. Sebastian Tello Trillo & Ausmita Ghosh & Kosali Simon & Johanna Catherine Maclean, 2015. "Losing Medicaid: What happens to hospitalizations?," NBER Working Papers 21580, National Bureau of Economic Research, Inc.
    4. Jeffrey Clemens & Joshua D. Gottlieb, 2014. "Do Physicians' Financial Incentives Affect Medical Treatment and Patient Health?," American Economic Review, American Economic Association, vol. 104(4), pages 1320-1349, April.
    5. Peter Zweifel & H. E. Frech, 2016. "Why ‘Optimal’ Payment for Healthcare Providers Can Never be Optimal Under Community Rating," Applied Health Economics and Health Policy, Springer, vol. 14(1), pages 9-20, February.
    6. Svetlana Pashchenko & Ponpoje Porapakkarm, 2013. "Quantitative Analysis of Health Insurance Reform: Separating Regulation from Redistribution," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(3), pages 383-404, July.
    7. Svetlana Pashchenko & Ponpoje Porapakkarm, 2016. "Cross-Subsidization in Employer-Based Health Insurance and the Effects of Tax Subsidy Reform," National Tax Journal, National Tax Association;National Tax Journal, vol. 69(3), pages 583-612, September.
    8. Jeffrey Clemens & Benedic Ippolito, 2019. "Uncompensated Care and the Collapse of Hospital Payment Regulation: An Illustration of the Tinbergen Rule," Public Finance Review, , vol. 47(6), pages 1002-1041, November.
    9. Meyer, Christina, 2022. "Geschlechtsspezifisches Altersvorsorgeverhalten – Untersuchungen mit dem deutschen Taxpayer-Panel," WISTA – Wirtschaft und Statistik, Statistisches Bundesamt (Destatis), Wiesbaden, vol. 74(2), pages 30-41.
    10. Martin B. Hackmann & Jonathan T. Kolstad & Amanda E. Kowalski, 2015. "Adverse Selection and an Individual Mandate: When Theory Meets Practice," American Economic Review, American Economic Association, vol. 105(3), pages 1030-1066, March.
    11. Clemens, Jeffrey & Wither, Michael, 2019. "The minimum wage and the Great Recession: Evidence of effects on the employment and income trajectories of low-skilled workers," Journal of Public Economics, Elsevier, vol. 170(C), pages 53-67.
    12. Li, Xiaoxue & Ye, Jinqi, 2017. "The spillover effects of health insurance benefit mandates on public insurance coverage: Evidence from veterans," Journal of Health Economics, Elsevier, vol. 55(C), pages 45-60.
    13. Yann Braouezec & John Cagnol, 2023. "Theoretical Foundations of Community Rating by a Private Monopolist Insurer: Framework, Regulation, and Numerical Analysis," Papers 2309.15269, arXiv.org, revised Dec 2023.
    14. Aditi P. Sen & Thomas DeLeire, 2018. "How does expansion of public health insurance affect risk pools and premiums in the market for private health insurance? Evidence from Medicaid and the Affordable Care Act Marketplaces," Health Economics, John Wiley & Sons, Ltd., vol. 27(12), pages 1877-1903, December.
    15. Jeffrey Clemens, 2016. "Redistribution through Minimum Wage Regulation: An Analysis of Program Linkages and Budgetary Spillovers," Tax Policy and the Economy, University of Chicago Press, vol. 30(1), pages 163-189.
    16. H. E. Frech & Michael P. Smith, 2015. "Anatomy of a Slow-Motion Health Insurance Death Spiral," North American Actuarial Journal, Taylor & Francis Journals, vol. 19(1), pages 60-72, January.
    17. Lieber, Ethan M.J., 2018. "Does health insurance coverage fall when nonprofit insurers become for-profits?," Journal of Health Economics, Elsevier, vol. 57(C), pages 75-88.
    18. Florian Scheuer & Kent Smetters, 2018. "How Initial Conditions Can Have Permanent Effects: The Case of the Affordable Care Act," American Economic Journal: Economic Policy, American Economic Association, vol. 10(4), pages 302-343, November.

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    More about this item

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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