scholarly journals Guaranteed renewability in health insurance: Taking into account changes in risk status and the cost of dying

2020 ◽  
Author(s):  
Annette Hofmann ◽  
Patrick Eugster
Keyword(s):  
Health Insurance ◽  
Private Insurance ◽  
Social Health Insurance ◽  
Insurance Markets ◽  
Risk Selection ◽  
Risk Status ◽  
Long Run ◽  
Changes In Risk ◽  
The Cost ◽  
Guaranteed Renewability

Guaranteed renewability protects policyholders from reclassification risk. Being an important characteristic of social health insurance, the potential for private insurance markets is high given its property of competing with risk selection. Without regulation, since healthcare expenditures increase strongly near death, it seems questionable whether insurers will be able to sustain guaranteed renewability in the long run - rather than investing in risk selection activity, In this study, the authors extend the seminal model of Pauly et al. (1995) to include (1) policyholders with improving risk status over time, and (2) policyholders’ high cost of dying. The objective is to find out about the actuarially fair guaranteed renewable premium in realistic conditions when taking into account these two extensions.

scholarly journals Unhealthy Insurance Markets: Search Frictions and the Cost and Quality of Health Insurance

2011 ◽  
Vol 101 (5) ◽  
pp. 1842-1871 ◽  
Author(s):  
Randall D Cebul ◽  
James B Rebitzer ◽  
Lowell J Taylor ◽  
Mark E Votruba
Keyword(s):  
Health Insurance ◽  
Private Insurance ◽  
Consumer Surplus ◽  
Insurance Markets ◽  
Search Frictions ◽  
Future Health ◽  
Search Friction ◽  
Commercial Health Insurance ◽  
The Cost

We analyze the effect of search frictions in the market for commercial health insurance. Frictions increase insurance premiums (enough to transfer 13.2 percent of consumer surplus from fully insured employer groups to insurers—approximately $34.4 billion in 1997); and increase insurance turnover (by 64 percent for the average policy). This rent transfer harms consumers and—when combined with heightened turnover—reduces incentives to invest in future health. We also find that a publicly financed insurance option can improve the efficiency of private insurance markets by reducing search friction induced distortions in pricing and marketing efforts. (JEL D83 G22, I18)

scholarly journals Auftrag und Grenzen der Sozialen Krankenversicherung

2006 ◽  
Vol 7 (Supplement) ◽  
pp. 5-26
Author(s):  
Peter Zweifel
Keyword(s):  
Health Insurance ◽  
Public Choice ◽  
Risk Adjustment ◽  
Product Innovation ◽  
Private Insurance ◽  
Social Health Insurance ◽  
Two Dimensions ◽  
The Other ◽  
Social Health ◽  
Risk Selection

Abstract This contribution seeks to answer two questions, (1) What are the reasons for a demand for social health insurance (SHI)?, and (2) What are the limits to the growth of SHI? A review of the reasons for the existence of SHI reveals that while economists have emphasized the possible contribution of SHI to efficiency, the available evidence points to public choice reasons, which also seem to explain better the growth of SHI. Indeed, since private insurance redistributes as well (albeit governed by chance), it is tempting for politicians to use SHI for systematic redistribution (the extent of which cannot easily be detected by net payers). Turning to the supply of SHI, two dimensions are studied in some detail, viz. efforts at product innovation and at risk selection. Competing suppliers of SHI, while hampered by risk adjustment which sanctions innovators for attracting the young, are predicted to invest in innovation. A monopolistic public SHI scheme, by way of contrast, does not need to select risks and, on the other hand, it is predicted to refrain from product innovation. This is but one limit to the growth of SHI; the ultimate one is citizens’ lack of willingness to pay for its continuing expansion, about which some evidence for the case of Switzerland is presented.

Contending with Risk Selection in Health Insurance Markets in Germany

2006 ◽  
Vol 7 (Supplement) ◽  
pp. 75-91 ◽  
Author(s):  
Jacob Glazer ◽  
Thomas G. McGuire
Keyword(s):  
Health Insurance ◽  
Risk Adjustment ◽  
Simple Approach ◽  
Insurance Markets ◽  
Risk Selection ◽  
Health Plans ◽  
Health Insurance Markets ◽  
The U.S

Abstract In many countries, competition among health plans or sickness funds raises issues of risk selection. Funds may discourage or encourage potential enrollees from joining, and these actions may have efficiency or fairness implications. This article reviews the experience in the U.S., and comments on the evidence for risk selection in Germany. There is little evidence that risk selection causes efficiency problems in Germany, but risk selection does lead to an inequality in contribution rates. A simple approach to equalizing contribution rates that does not involve risk adjustment is presented and discussed.

Transitional Subsidies for Health Insurance Coverage

2001 ◽  
Vol 38 (2) ◽  
pp. 225-231 ◽  
Author(s):  
Jonathan Gruber
Keyword(s):  
Health Insurance ◽  
Private Insurance ◽  
Insurance Coverage ◽  
Health Insurance Coverage ◽  
Recent Past ◽  
Waiting Period ◽  
Low Incomes ◽  
Loan Program ◽  
The Cost

Losing or leaving a job often means losing health insurance. Of all those who have lost private insurance and become uninsured, one-third have either left or lost a job in the recent past. Continuation of coverage subsidies under the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 mitigate only slightly this problem due to the high costs of the group coverage that must be purchased. This paper discusses a proposal to build on the successes of COBRA to extend insurance to this important population. The key components are: a doubling of the length of COBRA entitlement to 36 months; eligibility for workers in all firms, not just those with more than 20 employees, but with a waiting period of one to two years; the establishment of a new COBRA-LOAN program that would offer government loans to help enrollees pay the cost of COBRA while they searched for new opportunities; and forgiveness of repayments after the entitlement period for those with low incomes.

Strategies to Counteract Risk Selection in Social Health Insurance Markets

2019 ◽  
Author(s):  
Richard C. van Kleef ◽  
Thomas G. McGuire ◽  
Frederik T. Schut ◽  
Wynand P. M. M. van de Ven
Keyword(s):  
Health Insurance ◽  
Customer Service ◽  
Health Plan ◽  
Risk Sharing ◽  
Social Health Insurance ◽  
Social Health ◽  
Risk Selection ◽  
Risk Rating ◽  
Trade Offs ◽  
Fairness And Efficiency

Many countries rely on social health insurance supplied by competing insurers to enhance fairness and efficiency in healthcare financing. Premiums in these settings are typically community rated per health plan. Though community rating can help achieve fairness objectives, it also leads to a variety of problems due to risk selection, that is, actions by consumers and insurers to exploit “unpriced risk” heterogeneity. From the viewpoint of a consumer, unpriced risk refers to the gap between her expected spending under a health plan and the net premium for that plan. Heterogeneity in unpriced risk can lead to selection by consumers in and out of insurance and between high- and low-value plans. These forms of risk selection can result in upward premium spirals, inefficient take-up of basic coverage, and inefficient sorting of consumers between high- and low-value plans. From the viewpoint of an insurer, unpriced risk refers to the gap between his expected costs under a certain contract and the revenues he receives for that contract. Heterogeneity in unpriced risk incentivizes insurers to alter their plan offerings in order to attract profitable people, resulting in inefficient plan design and possibly in the unavailability of high-quality care. Moreover, insurers have incentives to target profitable people via marketing tools and customer service, which—from a societal perspective—can be considered a waste of resources. Common tools to counteract selection problems are risk equalization, risk sharing, and risk rating of premiums. All three strategies reduce unpriced risk heterogeneity faced by insurers and thus diminish selection actions by insurers such as the altering of plan offerings. Risk rating of premiums also reduces unpriced risk heterogeneity faced by consumers and thus mitigates selection in and out of insurance and between high- and low-value plans. All three strategies, however, come with trade-offs. A smart blend takes advantage of the strengths, while reducing the weaknesses of each strategy. The optimal payment system configuration will depend on how a regulator weighs fairness and efficiency and on how the healthcare system is organized.

Supplementary Health Insurance and Regulation of Healthcare Systems

2019 ◽  
Author(s):  
Brigitte Dormont
Keyword(s):  
Health Insurance ◽  
Cost Sharing ◽  
Social Insurance ◽  
Private Insurance ◽  
Social Health Insurance ◽  
Social Health ◽  
Managed Competition ◽  
Benefit Package ◽  
Care Services ◽  
Supplementary Health Insurance

Most developed nations provide generous coverage of care services, using either a tax financed healthcare system or social health insurance. Such systems pursue efficiency and equity in care provision. Efficiency means that expenditures are minimized for a given level of care services. Equity means that individuals with equal needs have equal access to the benefit package. In order to limit expenditures, social health insurance systems explicitly limit their benefit package. Moreover, most such systems have introduced cost sharing so that beneficiaries bear some cost when using care services. These limits on coverage create room for private insurance that complements or supplements social health insurance. Everywhere, social health insurance coexists along with voluntarily purchased supplementary private insurance. While the latter generally covers a small portion of health expenditures, it can interfere with the functioning of social health insurance. Supplementary health insurance can be detrimental to efficiency through several mechanisms. It limits competition in managed competition settings. It favors excessive care consumption through coverage of cost sharing and of services that are complementary to those included in social insurance benefits. It can also hinder achievement of the equity goals inherent to social insurance. Supplementary insurance creates inequality in access to services included in the social benefits package. Individuals with high incomes are more likely to buy supplementary insurance, and the additional care consumption resulting from better coverage creates additional costs that are borne by social health insurance. In addition, there are other anti-redistributive mechanisms from high to low risks. Social health insurance should be designed, not as an isolated institution, but with an awareness of the existence—and the possible expansion—of supplementary health insurance.

Risk Selection in Health Insurance Markets

2009 ◽  
pp. 253-291
Author(s):  
Peter Zweifel ◽  
Friedrich Breyer ◽  
Mathias Kifmann
Keyword(s):  
Health Insurance ◽  
Insurance Markets ◽  
Risk Selection ◽  
Health Insurance Markets

Combining Life and Health Insurance*

2019 ◽  
Vol 135 (2) ◽  
pp. 913-958 ◽  
Author(s):  
Ralph S J Koijen ◽  
Stijn Van Nieuwerburgh
Keyword(s):  
Health Insurance ◽  
Life Insurance ◽  
Survival Rates ◽  
Insurance Companies ◽  
Insurance Markets ◽  
Free Access ◽  
Access To Treatment ◽  
Term Care ◽  
Long Run ◽  
Premium Income

Abstract We estimate the benefit of life-extending medical treatments to life insurance companies. Our main insight is that life insurance companies have a direct benefit from such treatments because they lower the insurer’s liabilities by pushing the death benefit further into the future and raising future premium income. We apply this insight to immunotherapy, treatments associated with durable gains in survival rates for a growing number of cancer patients. We estimate that the life insurance sector’s aggregate benefit from FDA-approved immunotherapies is $9.8 billion a year. Such life-extending treatments are often prohibitively expensive for patients and governments alike. Exploiting this value creation, we explore various ways life insurers could improve stress-free access to treatment. We discuss potential barriers to integration and the long-run implications for the industrial organization of life and health insurance markets, as well as the broader implications for medical innovation and long-term care insurance markets.

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