Can multiple choice be managed to constrain health care costs?
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Choice Behavior↗
SEARCH · PubMed Health
Results for “Insurance Selection Bias”
Explore indexed PubMed citations for clinical trials, systematic reviews and public health research. Read source abstracts and follow each citation to its original PubMed record.
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Guaranteed renewability and the problem of risk variation in individual health insurance markets.
Consumers should be protected against fluctuations in premiums for private individual health insurance associated with the onset of high-cost chronic conditions. The most commonly discussed way to do so is through community rating, which provides protection but can require a heavy regulatory burden and can create incentives for adverse selection and cream skimming. This paper describes an alternative method of providing the same type of protection: insurance contract provisions that guarantee renewability for the next coverage period at class-average rates. Drawing on recent work in insurance theory, the paper shows that such protection is feasible in competitive insurance markets. Guaranteed renewability, which is required of all individual health insurance by the Health Insurance Portability and Accountability Act (HIPAA) of 1996, is incomplete because the law fails to require that premiums be the same for all insured persons in a rating class. However, the paper reports the results of a recent survey of state insurance regulation, which indicates that all but three state insurance departments report having such a requirement. The paper concludes with a discussion of possible threats to the protection guaranteed renewability provides against risk segmentation.
Actuarial Analysis↗
The nongroup health insurance market: short on facts, long on opinions and policy disputes.
Individual health insurance is more administratively costly and more prone to adverse selection (especially in the presence of community rating) than group health coverage is. In this paper we show that the individual market has been shrinking over time but that it might be stimulated if tax credits for such insurance were made available. The primary areas of factual disagreement have to do with the frequency with which individual insurers charge some applicants higher premiums than others (based on health risk), and the effect that premiums related to risk have on the likelihood of insurance purchase at different income levels. The primary area of policy disagreement concerns the value of offering insurance at lower premiums to higher risks relative to the value of making voluntary insurance attractive to lower risks. We argue that a major market failure for individual coverage may be caused by insurers' inability to distinguish some truly low risks. We conclude that the individual market works acceptably well for about 80 percent of potential buyers, but its performance for the remaining 20 percent of low-income or high-risk persons is controversial.
Adolescent↗
Using tax credits and state high-risk pools to expand health insurance coverage.
There are practical proposals now on the public policy table to reduce the number of Americans without health coverage. While they won't make health care free or eliminate the forty million uninsured persons, they would help millions of Americans acquire or improve their health insurance. Practical strategies can also be taken to address access issues for unhealthy persons in the nongroup market through federal assistance to states to establish and improve state high-risk health insurance pools, as well as to make health insurance more affordable for low-income Americans.
Health Policy↗
Ensuring health security: is the individual market ready for prime time?
Proposals to expand coverage of the uninsured through federal tax credits rely heavily on the individual insurance market. Yet the current market makes coverage less accessible, less affordable, and inadequate to meet the needs of many people without insurance, especially those who have modest incomes or are in less-than-perfect health. States' efforts to regulate the individual market can improve access for the vulnerable but, absent subsidies, may place coverage out of reach for the young and healthy. A combination of subsidies and market reforms could make insurance available to millions of Americans.
Adult↗
The individual market: a delicate balance.
In our voluntary insurance market, the greatest challenge is maintaining a balance between "healthy" and "sick" enrollees. Affordable coverage is possible only if many healthy persons purchase insurance, thereby cross-subsidizing high-risk persons. This is a particular challenge in the individual market, where healthy enrollees have no employer or tax subsidies to lower their premium costs. A successful individual market requires a delicate balance regarding the risk level of enrollees, the rates charged, and the regulations adopted. Small miscalculations in any of these areas can quickly result in spiraling premiums and plummeting coverage rates.
Economic Competition↗
Government as reinsurer for very-high-cost persons in nongroup health insurance markets.
Fear of adverse selection drives carriers in nongroup insurance markets to compete in their use of selection mechanisms to screen out high-risk applicants. This contributes to economic inefficiency. Government could assume the role of reinsurer, by assuming responsibility for most of the costs of people who are in the highest 2-3 percent of the national spending distribution. This would spread the burden of costs of very-high-cost persons to the broad population base and could cause premiums to fall as carriers spend less on efforts to avoid adverse selection.
Efficiency, Organizational↗
The nongroup market as one element of a broader coverage-expansion strategy.
Effective health insurance provides financial protection and access to services that maintain and improve health. Such coverage is difficult to obtain in the nongroup market, however, because of a lack of sponsorship, the nature of coverage available, adverse selection, and high administrative costs. However, certain interventions could make this market an effective avenue for expanding coverage to moderate- to high-income persons who lack access to employer-based coverage. In "less regulated" markets, we suggest broader, deeper funding of high-risk pools and standardization of benefits, preexisting condition exclusions, and waiting periods. In "more regulated" markets, a broadly funded reinsurance mechanism could moderate premiums.
Fees and Charges↗
Options and opportunities for individuals and families in the private health insurance market.
A variety of options exist for coverage in the individual health insurance market. Coverage is state-regulated; this provides consumers with important access and benefit protection and ensures stability of insurers. Coverage for individuals is based on health history in most states, and most individuals either qualify for coverage or are able to find it through state high-risk pools and other state mechanisms. Since individual-market purchasers do not have an employer contribution to offset the cost of coverage, proposals for refundable tax credits offer great potential for making health insurance coverage more affordable for eligible persons.
Chronic Disease↗
Private health insurance in Ireland.
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Humans↗
Voluntary health insurance in the European Union: a critical assessment.
The authors examine the role and nature of the market for voluntary health insurance in the European Union and review the impact of public policy, at both the national and E.U. levels, on the development of this market in recent years. The conceptual framework, based on a model of industrial analysis, allows a wide range of policy questions regarding market structure, conduct, and performance. By analyzing these three aspects of the market for voluntary health insurance, the authors are also able to raise questions about the equity and efficiency of voluntary health insurance as a means of funding health care in the European Union. The analysis suggests that the market for voluntary health insurance in the European Union suffers from significant information failures that seriously limit its potential for competition or efficiency and also reduce equity. Substantial deregulation of the E.U. market for voluntary health insurance has stripped regulatory bodies of their power to protect consumers and poses interesting challenges for national regulators, particularly if the market is to expand in the future. In a deregulated environment, it is questionable whether this method of funding health care will encourage a more efficient and equitable allocation of resources.
Economic Competition↗
Adverse selection and the challenges to stand-alone prescription drug insurance.
This paper investigates a possible predictor of adverse selection problems in unsubsidized stand-alone prescription drug insurance: the persistence of an individual's high spending over multiple years. Using Medstat claims data and data from the Medicare Survey of Current Beneficiaries, we find that persistence is much higher for outpatient drug expenses than for other categories of medical expenses. We then use these estimates to develop a simple and intuitive model of adverse selection in competitive insurance markets and show that this high relative persistence makes it unlikely that unsubsidized drug insurance can be offered for sale, even with premiums partially risk adjusted, without a probable adverse selection death spiral. We show that this outcome can be avoided if drug coverage is bundled with other coverage, and we briefly discuss the need either for comprehensive coverage or generous subsidies if adverse selection is to be avoided in private and Medicare insurance markets.
Drug Prescriptions↗
Demand for a Medicare prescription drug benefit: exploring consumer preferences under a managed competition framework.
Several proposals for adding a prescription drug benefit to the Medicare program rely on consumer choice and market forces to promote efficiency. However, little information exists regarding: 1) the extent of price sensitivity for such plans among Medicare beneficiaries, or 2) the extent to which drug-only insurance plans using various cost-control mechanisms might experience adverse selection. Using data from a survey of elderly Wisconsin residents regarding their likely choices from a menu of hypothetical drug plans, we show that respondents are likely to be price sensitive with respect to both premiums and out-of-pocket costs but that selection problems may arise in these markets. Outside intervention may be necessary to ensure the feasibility of a market-based approach to a Medicare drug benefit.
Aged↗
Health and the cost of nongroup insurance.
This analysis estimates a selection-adjusted model of the premium for nongroup insurance to measure the effect of health status on the cost of nongroup insurance. Using data from two recent national surveys, the probability of buying nongroup insurance is about 50% lower for people in fair or poor health compared to similar people in excellent health. Correcting for selection, premiums are about 15% higher for people with modest health problems, and 43% to 50% higher for people with major health problems compared to those in excellent health. We use the selection-corrected premiums to simulate the effects on the price and affordability of nongroup insurance for the uninsured under two recent tax credit proposals.
Adult↗
Medicare modernization and distributional implications.
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Aged↗
"Cancer in the family" and genetic testing: implications for life insurance.
The potential for discrimination when applying for insurance can be of concern for individuals with a family history of cancer or of a genetic disorder and who are considering genetic counselling or genetic testing. The actual incidence of "genetic discrimination", however, is not known, despite considerable media coverage of this issue. The clinical details required by insurers have received less attention. We obtained primary application and personal statement forms used by 21 different underwriters of voluntary life insurance and found substantial differences in the information requested about family history and genetic testing. All insurance applications, however, contained a duty of disclosure that would require revealing the result, if known by the applicant, of a genetic test in a family member. Therefore, decisions made by family members can affect insurance applications, and people considering genetic testing may also need to consider the implications of the results for other family members. Health practitioners should balance the potential benefits of appropriate genetic testing against potential restriction to life and income-protection insurance when advising people about genetic testing.
Australia↗
Solidarity, genetic discrimination, and insurance: a defense of weak genetic exceptionalism.
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Genetic Predisposition to Disease↗
Insurance reform in a voluntary system: implications for the sick, the well, and universal health care. American College of Physicians.
In the absence of universal coverage, carefully designed insurance reforms can make health insurance in the individual and small-group markets more affordable for those who need it most--the sick--and more secure for all subscribers. In this position paper, the American College of Physicians calls for specific strong reforms at both the state and federal levels. Substantial reform of the insurance marketplace is a necessary step toward achieving universal coverage. It should reflect the view that providing quality health care is in the best interests of the community and that health care financing should be a community responsibility.
Actuarial Analysis↗