Unbiased Analysis of Today's Healthcare Issues

Why do Sick Pepole Avoid Private Insurance in Germany?

Healthy, high-income people in Germany choose private health insurance. Sick, low-income people generally choose public insurance through Germany’s sickness funds. It shouldn’t be surprising risk selection between public and private insurance occurs in Germany.  Here’s why: While public premiums [in Germany] are subject to community rating, private premiums are risk rated. Moreover, public premiums are […]

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Medicare Advantage Plan’s Response to Risk Adjustment

Medicare beneficiaries have the option to enroll in private plans to have them operate their benefits rather than use the tradiational Medicare Fee-for-services (FFS) program.  Medicare pays these private plans, known as Medicare Advantage (MA) plans, premiums based on the health status of their enrollees.   Medicare uses a risk score to measure beneficiary health status. […]

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Why do insurance companies reject applicants rather than just raise their premiums?

As of 2011, in 45 out of 51 States (including DC) insurers can choose not to provide applicants with insurance coverage.  Requiring insurers to offer coverage to all individuals is known in insurance lingo as “guaranteed issue.” One question is why don’t insurance companies just charge high-risk individuals higher premiums?  Why would they want to […]

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High-Risk Health Insurance Pools

Many individuals are uninsureable. Their pre-existing conditions indicate that they are so risky either: i) no insurance company would cover them or ii) the premiums would be so high that the individual could not afford them. To insure some of these people, many states have set up high-risk health insurance pools (HRP). Currently, all these […]

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Adverse Selection in Germany

In Germany, poor and middle class individuals must use public insurance, but well-off Germans can choose between using public and private insurance. “In Germany, about 90% of the population is publicly insured (Colombo & Tapay, 2004). Buying public insurance is mandatory for dependent employees with a regular employment contract as long as their income does […]

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The Problem with Genetic Testing

Deciding whether to get tested for genetic diseases is a choice many people will face in the coming years.  By knowing whether or not you are more likely to develop a given disease, you may be able to change your health habits or seek earlier medical treatment.  In addition, genetic testing provides additional knowledge useful […]

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Finding evidence of Adverse Selection

Cohen and Siegelman (2009) document empirical research on adverse selection in 5 markets: i) automobile insurance, ii) annuities and life insurance, iii) long term care, iv) crop insurance, and v) health insurance.  The presence of adverse selection varies not only across markets, but also within markets depending on the product sold and the type of […]

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Genetic Adverse Selection

“…individuals who carry the [Huntington Disease] genetic mutation are up to 5 times as likely as the general population to own long-term care insurance…relatively limited increases in genetic information may threaten the viability of private long-term care insurance.” Oster et al. (2009) “Genetic Adverse Selection: Evidence from Long-Term Care Insurance and Huntington Disease” NBER Working […]

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Why does Kaiser Permanente advertise at 24-hour Fitness?

Adverse Selection. The firm wants to attract healthy individuals at all ages.  Gym membership may be observable, but it is difficult to observe frequency of gym visits.  By advertising at 24-hour Fitness, Kaiser Permanente’s ads have the strongest effect on those who go to the gym most frequently.  If  fitness enthusiasts decide to enroll at […]

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Movement Across Health Plans

Why do people change health plans? Of course, the most obvious reasons are moving, changing jobs, or qualifying for Medicare. However, some people change health plans even when they remain in the same job. Why is this? A working paper by Cutler, Lincoln and Zeckhauser (2009) give the following explanations: Adverse selection, the movement of […]

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