TY  - JOUR
AU  - Finkelstein,Amy
TI  - Minimum Standards and Insurance Regulation: Evidence from the Medigap Market
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 8917
PY  - 2002
Y2  - May 2002
UR  - http://www.nber.org/papers/w8917
L1  - http://www.nber.org/papers/w8917.pdf
N1  - Author contact info:
Amy Finkelstein
Department of Economics
MIT E52-274C
50 Memorial Drive
Cambridge, MA 02142
Tel: 617/253-4149
Fax: 617/868-2742
E-Mail: afink@mit.edu
AB  - This paper examines the consequences of imposing binding minimum standards on the market for voluntary private health insurance for the elderly. Theoretically, the effect of these standards on insurance coverage and on welfare is ambiguous. I find robust evidence of a substantial decline in insurance associated with the minimum standards. The central estimates suggest that the standards are associated with an 8 percentage point (25 percent) decrease in the proportion of the population with coverage in the affected market; I find no evidence of substitution to other, unregulated sources of insurance coverage. Additional evidence suggests that the minimum standards are also associated with reduced coverage of non-mandated benefits among the insured. The empirical results are most consistent with a model of the effect of minimum standards on insurance markets with adverse selection, and suggest that adverse selection exacerbates the potential for unintended negative consequences of minimum standards. The final section of the paper considers the welfare implications of the changes in risk bearing associated with the minimum standards. The results suggest that the imposition of these standards was, even under relatively conservative assumptions, welfare reducing on net.
ER  -