Health Care Reform, Efficiency of Health Insurers, and Optimal Health Insurance Markets

Abstract

This research uses the input-oriented Data Envelopment Analysis (DEA) approach to examine the efficiency of the U.S. health insurers. It shows that more insurers are less efficient than the previous sample year; however, the results suggest that the federal health care reform have no significant effect on the overall efficiency of all the insurers as a whole which is very low but does not change much over time. This research explores how to improve the efficiency of the health insurance market by proposing the state, regional and national efficiency-based goal-oriented market models and an efficiency duplicating system, and discusses important implications to the health care compacts, the health insurance exchanges or marketplaces, and the national multi-state programs. It also analyzes further moves for efficiency enhancement with regard to payments methods and the health care delivery system. One interesting finding is that the Medicaid program is very efficient as provides support to the offering of Medicaid coverage and further expansion which enhances the health welfare of the society with fewer resources inputs from the perspective of efficiency. This research should provide important insights for the state and federal governments, policy makers, regulators, the health insurance industry, and consumers.

Keywords: Health insurance, Obamacare, Health care reform, Cost efficiency

JEL Classification: G22, H51, I13