Comments on: Empirical Model of Insurance Markets http://healthcare-economist.com/2009/11/05/empirical-model-of-insurance-markets/ Tue, 22 May 2012 08:04:55 +0000 hourly 1 http://wordpress.org/?v=3.3.2 By: Guy Thomas http://healthcare-economist.com/2009/11/05/empirical-model-of-insurance-markets/comment-page-1/#comment-5194 Guy Thomas Tue, 10 Nov 2009 15:16:06 +0000 http://healthcare-economist.com/?p=2847#comment-5194 <i>the welfare affects of adverse selection tend to be small in practice. </i> Why do economists always think of adverse selection as a cost? It's a mis-measure of the efficacy of insurance. Correctly conceived, (a modest degree of) adverse selection incrreases loss coverage, which is a benefit. See "Loss ocverage as a public policy objective for risk classification schemes" http://tinyurl.com/cgal3g or "Demand elasticity, risk classification and loss coverage: when can community rating work?" http://tinyurl.com/da5z7y the welfare affects of adverse selection tend to be small in practice.

Why do economists always think of adverse selection as a cost? It’s a mis-measure of the efficacy of insurance. Correctly conceived, (a modest degree of) adverse selection incrreases loss coverage, which is a benefit. See “Loss ocverage as a public policy objective for risk classification schemes” http://tinyurl.com/cgal3g
or
“Demand elasticity, risk classification and loss coverage: when can community rating work?” http://tinyurl.com/da5z7y

]]> By: Steven Hales http://healthcare-economist.com/2009/11/05/empirical-model-of-insurance-markets/comment-page-1/#comment-5176 Steven Hales Fri, 06 Nov 2009 14:19:14 +0000 http://healthcare-economist.com/?p=2847#comment-5176 Question: In current HCR bills in the House and Senate won't insurance companies save a certain percentage of their SGA expenses when it is no longer possible under law to take into account the possibility of adverse selection? Follow up: If true, then given that health insurers have MBRs in the high 70's to low 80's and some of the bills mandate MBRs of at least 85, will the savings be enough to prevent the average MBR from rising beyond profitability? Question: In current HCR bills in the House and Senate won’t insurance companies save a certain percentage of their SGA expenses when it is no longer possible under law to take into account the possibility of adverse selection?

Follow up: If true, then given that health insurers have MBRs in the high 70′s to low 80′s and some of the bills mandate MBRs of at least 85, will the savings be enough to prevent the average MBR from rising beyond profitability?

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