NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Regulatory Redistribution in the Market for Health Insurance

Jeffrey Clemens

NBER Working Paper No. 19904
Issued in February 2014
NBER Program(s):   HC   HE   PE

Community rating regulations equalize the insurance premiums faced by the healthy and the unhealthy. Intended reductions in the unhealthy’s premiums can be undone, however, if the healthy forgo coverage. The severity of this adverse selection problem hinges largely on how health care costs are distributed across market participants. Theoretically, I show that Medicaid expansions can combat adverse selection by removing high cost individuals from the relevant risk pool. Empirically, I find that private coverage rates improved significantly in community rated markets when states expanded Medicaid’s coverage of relatively unhealthy adults. The effects of Medicaid expansions and community rating regulations are fundamentally linked.

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This paper was revised on July 30, 2014

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w19904

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