Minimum Standards and Insurance Regulation: Evidence from the Medigap Market / Amy Finkelstein.

Format:

Book

Author/Creator:

Finkelstein, Amy.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w8917.

NBER working paper series no. w8917

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Minimum Standards and Insurance Regulation

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2002.

Summary:

This paper examines the consequences of imposing binding minimum standards on the market for voluntary private health insurance for the elderly. Theoretically, the effect of these standards on insurance coverage and on welfare is ambiguous. I find robust evidence of a substantial decline in insurance associated with the minimum standards. The central estimates suggest that the standards are associated with an 8 percentage point (25 percent) decrease in the proportion of the population with coverage in the affected market; I find no evidence of substitution to other, unregulated sources of insurance coverage. Additional evidence suggests that the minimum standards are also associated with reduced coverage of non-mandated benefits among the insured. The empirical results are most consistent with a model of the effect of minimum standards on insurance markets with adverse selection, and suggest that adverse selection exacerbates the potential for unintended negative consequences of minimum standards. The final section of the paper considers the welfare implications of the changes in risk bearing associated with the minimum standards. The results suggest that the imposition of these standards was, even under relatively conservative assumptions, welfare reducing on net.

Notes:

Print version record

May 2002.