Health Affairs

Posting date: October 23, 2002

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Health Affairs, 10.1377/hlthaff.w2.380
Copyright © 2003 by Project HOPE

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Perspective: Government As Reinsurer For Very-High-Cost Persons In Nongroup Health Insurance Markets

Katherine Swartz ^1*

¹ Katherine Swartz is a professor of health policy and economics in the Department of Health Policy and Management, Harvard School of Public Health, in Boston.

^*Corresponding author.

Abstract

Fear of adverse selection drives carriers in nongroup insurance markets to compete in their use of selection mechanisms to screen out high-risk applicants. This contributes to economic inefficiency. Government could assume the role of reinsurer, by assuming responsibility for most of the costs of people who are in the highest 2-3 percent of the national spending distribution. This would spread the burden of costs of very-high-cost persons to the broad population base and could cause premiums to fall as carriers spend less on efforts to avoid adverse selection.

Key Words: Insurance Coverage, Access To Care, Health Reform

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