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American Economic Review: Vol. 93 No. 2 (May 2003)

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A New Approach to Risk-Spreading via Coverage-Expansion Subsidies

Article Citation

Holahan, John, Len M. Nichols, Linda J. Blumberg, and Yu-Chu Shen. 2003. "A New Approach to Risk-Spreading via Coverage-Expansion Subsidies ." The American Economic Review, 93(2): 277-282.

DOI: 10.1257/000282803321947191

Abstract

The persistently large number of uninsured, roughly 40 million per year since 1993, continues to elicit bipartisan policy interest. Coverage-expansion proposals without mandates, by far the most common since the defeat of the Clinton plan, must address risk-pooling realities in private markets. Insurers have strong financial incentives to segment risks and minimize pooling of heterogeneous risks, and narrow risk-pooling will diminish the adequacy of premium subsidies based on income alone, at least for higher-risk individuals. The current debate over flat tax credits and the non-group market is a case in point (Blumberg, 2001; Center for Studying Health System Change, 2002; Jack Hadley and James D. Reschovsky, 2002). We, along with nine other teams, were asked to develop a proposal that would expand coverage in a large and creative way (see Holahan et al., 2001). The proposal we developed would subsidize low-income individuals and families but also addresses the issue of inefficient and inequitable risk-pooling.

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Authors

Holahan, John
Nichols, Len M.
Blumberg, Linda J.
Shen, Yu-Chu


American Economic Review



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