Health_Insurance_part2_09 - Why Are There So Many Uninsured...

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Why Are There So Many Uninsured People in the U.S.? PAM 4350 February 12, 2009
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Look at “Prelim Study Guide” on Blackboard For Information About Prelim Exam The most important source of material for the exam will be the lecture notes. Your first priority should be to understand the material presented and discussed in class. A small number of the multiple-choice, true/false, or short answer questions may refer to information that is in the readings but was not explicitly covered during class. The real value of understanding the readings will be to improve the thoroughness and persuasiveness of your essay response. That is, you will likely be able to write a good essay based on an understanding of the lecture material but a great essay if you also incorporate information from the readings. You would be smart to review last year’s midterm to get a better idea of the types of questions I tend to ask and the length of the exam. The answer key to last year’s midterm will also be helpful. Both of these are available on Blackboard.
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$2,300 $23,000 Healthy 40-year old woman 60-year old diabetic male Community- rated premium $12,650 Insurer’s expected profit Insurer’s expected loss Under Community-Rated Premiums, Sick People Have Greatest Demand for Health Insurance, But Insurers Have Incentives to Avoid Them
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Health Insurance Premiums Premiums determined by 1 of 2 methods: Experience Rating = $2,300 and $23,000 Based on a person’s predicted costs based on their current age, gender, health conditions, health behaviors… Premiums differ between people due to different health levels Community Rating (CR) = $12,650 for both Premium same for all people regardless of age, gender, whether smoke, health conditions… Financial risk spread among a larger community Healthy people subsidize sicker people (equity)
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Charging everyone the same premium, regardless of health level, promotes equity If the premium covers the health insurer’s expected costs, it exceeds the expected expenses for the young and healthy (YH), but falls short of the expected expenses for the older and sicker (OS) Results Some YH’s may not want to buy health insurance. As they drop out, it raises premiums for those remaining. Insurers might not want to sell policies to OS’s CR probably increases the number of uninsured while altering mix of insured people (sick people more likely to have health insurance than healthy people) Community Rating (CR) Can Cause Adverse Selection
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Peter Jennings Video 13:00 – 15:40
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Control of Adverse Selection Group Insurance: a group of people who come together for reasons other than buying insurance (e.g., employees at large companies) should contain both healthy and sick people, but the overall composition should be fairly representative of the general population Pre-existing condition clause (helps insurers and keeps premiums lower for healthy people, but doesn’t help unhealthy people).
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This note was uploaded on 04/25/2009 for the course PAM 4350 taught by Professor Nicholson during the Spring '08 term at Cornell University (Engineering School).

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Health_Insurance_part2_09 - Why Are There So Many Uninsured...

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