Redefining the Terms of Health Insurance to Accommodate Varying Consumer Risk Preferences
Ira Mark Ellman
Arizona State University College of Law; Arizona State University (ASU) - Department of Psychology; Center for the Study of Law and Society, Berkeley Law, University of California, Berkeley
Mark A. Hall
Wake Forest University - School of Law
American Journal of Law & Medicine, Vol. 20, p. 187, 1994
Many health care reforms focus on regulation while forgetting the benefits of competition. While this focus is understandable, it ignores the ability of markets to provide a variety of products that satisfy a range of consumer preferences. This article focuses on this value of competition, which the existing health care market also fails to realize fully. Preference satisfaction is integral to quality enhancement because it allows different dimensions of quality to be adjusted to the variety of consumer tastes for different styles and components of medical practice. Unfortunately, the single-minded attention of many reformers to the universal coverage and cost-reduction problems has yielded proposals that actually exacerbate the existing market's imperfect resolution of the preference problem.
This article’s emphasis is important not only because consumer choice is a positive value but also because the political prospects of any reform proposal will be severely burdened if it is seen as eliminating consumer choice. Nonetheless, it is difficult because there is no easy way to know what are the coverage features about which consumers should have choice.
It concludes that a properly functioning health care system should offer a range of choices from which consumers may select, although this does not mean, however, that sensible policy would impose no limits on consumer choices. It proposes to define the contractual obligation of competing private insurance plans in terms of budgets for designated pools of patients, called 'Budgeted Risk Preferences,' and fleshes out the details of this system, noting advantages and objections.
Keywords: Health Insurance, Budgeted Risk Preferences, Market Mechanisms in Health Care
Date posted: September 2, 2009
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