09.29.11.Health_Insurance_part2

09.29.11.Health_Insurance_part2 - Private Health Insurance...

Info iconThis preview shows pages 1–12. Sign up to view the full content.

View Full Document Right Arrow Icon
Private Health Insurance and the Uninsured: The Basics HCMG 101 Daniel Polsky September 29, 2011
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Review of Tuesday’s lecture • Health insurance: theoretical purpose is to protect people from hard to predict financial risk of low-probability health events. • Problems related to health insurance: – Does not just protect against low probability events • Adverse selection • Asymmetric information
Background image of page 2
Consider the premiums for two types of beneficiaries Medical costs last year $1,000 $25,000 Expected costs $2,000 $22,000 this year + 15% loading charge Premium under experience rating $2,300 $25,300 Premium under $4,632 $4,632 community rating 40-year old woman who 40-year old woman smokes, has diabetes, in perfect health and is obese
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Experience Rated vs. Community Rated Who is likely to buy health insurance in each pricing system? Which of these two pricing systems is “fairer”? How do these systems affect health insurance company behavior?
Background image of page 4
Issues with rating systems • Equity in community rating: Everyone is charged the same premium, regardless of health level • Implications: – Young and healthy may not want to buy health insurance – Why? – Insurers might not want to sell policies to the old and sick – Why? • Community Rating probably increases the number of uninsured • Experience Rating decreases the number of sick people with insurance (relative to the healthy)
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Today’s Objectives: Health Insurance Issues 1)Overused 2)Misused 3)Underused … So why do we have a system of insurance based on employer sponsorship?
Background image of page 6
Health Insurance Overused • Tax exclusion for health insurance premiums • Moral Hazard
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Average Annual Health Insurance Premiums, 2009 $4,045 $9,860 $779 $3,515 Single Plans Family Plans Employee Employer Source: Kaiser Family Foundation, 2009 Annual Survey of Employer Health Benefits
Background image of page 8
Important digression: Research shows that workers actually pay almost all of the health insurance premium • Blumberg (1999): 56-85% of an employer’s contribution to the health insurance premium is shifted back to workers through reduced wages. • Gruber (1994): almost 100% of an employer’s contribution is shifted to workers. • If true, mandating employers to provide health insurance would result in lower wages and may ultimately not benefit workers. • Workers receive the entire tax advantage of the tax exclusion
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
$50,000 Value of employee to the firm $50,000 $0 Health insurance premium - employer $4,000 - employee $1,000 $50,000 Salary after insurance payments $45,000 $17,500 Employee taxed (35%) $15,750 $32,500 Salary after taxes $29,250 $5,000 Individual health insurance policy $0 $27,500 Money available for non-medical $29,250 spending Tax Advantages of Employer-Sponsored Health Insurance Employer Provides health Insurance Employer does not provide health insurance Employee saves $1,750
Background image of page 10
Tax exclusion: Large Total: $209 billion. – Exceeds federal government’s Medicaid payments,
Background image of page 11

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 12
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 50

09.29.11.Health_Insurance_part2 - Private Health Insurance...

This preview shows document pages 1 - 12. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online