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Remedies for Sick Insurance

47 Pages Posted: 31 Mar 2012  

Daniel L. McFadden

University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER)

Carlos Noton

Independent

Pau Olivella

Autonomous University of Barcelona - Department of Business Administration; International Health Economics Association (iHEA)

Date Written: March 2012

Abstract

This expository paper describes the factors that contribute to failure of health insurance markets, and the regulatory mechanisms that have been and can be used to combat these failures. Standardized contracts and creditable coverage mandates are discussed, along with premium support, enrollment mandates, guaranteed issue, and risk adjustment, as remedies for selection-related market damage. An overall conclusion of the paper is that the design and management of creditable coverage mandates are likely to be key determinants of the performance of the health insurance exchanges that are a core provision of the PPACA of 2010. Enrollment mandates, premium subsidies, and risk adjustment can improve the stability and relative efficiency of the exchanges, but with carefully designed creditable coverage mandates are not necessarily critical for their operation.

Suggested Citation

McFadden, Daniel L. and Noton, Carlos and Olivella, Pau, Remedies for Sick Insurance (March 2012). NBER Working Paper No. w17938. Available at SSRN: https://ssrn.com/abstract=2031926

Daniel L. McFadden (Contact Author)

University of California, Berkeley - Department of Economics ( email )

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Carlos Noton

Independent ( email )

No Address Available

Pau Olivella

Autonomous University of Barcelona - Department of Business Administration ( email )

Campus Bellaterra Edifici B.
Bellaterra (Barcelona), 08193
Spain
3493-581 2369 (Phone)
3493-581 24 61 (Fax)

International Health Economics Association (iHEA) ( email )

435 East Durham Street
Philadelphia, PA 19119
United States

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