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Improving health insurance markets: cost efficiency, implementation, and financing of expanding association health plans

Author

Listed:
  • Jordan Alzubi

    (National Taiwan Normal University)

  • Derrick Fung

    (The Hang Seng University of Hong Kong)

  • Charles Yang

    (Florida Atlantic University)

  • Jason Yeh

    (The Chinese University of Hong Kong)

Abstract

This research investigates whether and how expanding association health plans (AHPs) would generate more cost savings and enhance availability and affordability in the individual health insurance markets. In our analyses, we extend the AHP’s commonality of interest to include geographic proximity and form hypothetical statewide AHPs. We use modified context-dependent traditional and slack-based data envelopment analysis models from various perspectives of stakeholders. We find that, by structuring and operating the expanded individual AHPs following the efficient practices of large-group plans, significant premium and expense reductions would be achieved while preserving the health benefits compliant with the Affordable Care Act. We recommend each insurer create a statewide pseudo-association to pool all its individual enrollees and offer them a large-group health plan; and suggest a hybrid experience and retrospective approach to improve the AHPs’ operations through efficiency-aligned optimizations of premiums and health expenditures, with cross-subsidies from an individual guaranty fund. We find that the efficiency-based cross-subsidies from group plans would significantly reduce government subsidies to the individual health insurance markets.

Suggested Citation

  • Jordan Alzubi & Derrick Fung & Charles Yang & Jason Yeh, 2022. "Improving health insurance markets: cost efficiency, implementation, and financing of expanding association health plans," Review of Quantitative Finance and Accounting, Springer, vol. 59(2), pages 671-694, August.
    • Handle: RePEc:kap:rqfnac:v:59:y:2022:i:2:d:10.1007_s11156-022-01054-y
    DOI: 10.1007/s11156-022-01054-y
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    References listed on IDEAS

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    Cited by:

    1. Fung, Derrick W.H. & Wei, Pengyu & Yang, Charles C., 2023. "State subsidized reinsurance programs: Impacts on efficiency, premiums, and expenses of the U.S. health insurance markets," European Journal of Operational Research, Elsevier, vol. 306(2), pages 941-954.

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    More about this item

    Keywords

    Data envelopment analysis; Cost efficiency; Association health plans; Individual health insurance; Health expenditures;
    All these keywords.

    JEL classification:

    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health

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