Reclassification Risk in the Small Group Health Insurance Market

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ABSTRACT Health insurance without long-run contracts does not necessarily provide risk protection over time. Enrollees with a bad health shock in one year may be faced with higher premiums in the subsequent year, to account for the increase in expected health risk. We consider the small group insurance market for a period and place where insurers could largely pass through expected risk in the form of higher premiums. Using a panel of claims, plan characteristics, and premium data from a large, national insurer, we use lagged claims to calculate the expected health risk. We find that the insurer passes on 30% of an expected increase in mean health risk for an employer in the form of higher per-person premiums. We find no significant impact of health shocks on plan selection. We evaluate the welfare effects of community rating---as will occur over time under the ACA---and full experience rating relative to the observed pass through. Click here to view paper.
		PRESENTER Gautam Gowrisankaran University of Arizona
		RESEARCH FIELDS Industrial Organization Health Economics Environmental Economics Applied Econometrics
		DATE: 10 Aug 2016 (Wednesday)
		TIME: 12noon- 1.30pm
		VENUE: Meeting Room 5.1, Level 5 School of Economics Singapore Management University 90 Stamford Road Singapore 178903