Social and Behavioral Sciences Commons^™

Premium Risk And Healthcare Policy, Matthew Coffina

Honors Papers

In this paper, I analyze four alternative policies that address "premium risk": the risk that health insurance premiums will increase if an individual acquires a chronic condition. They are: premium risk insurance, community rating, anti-discrimination laws for large firms, and government subsidies. I show that community rating and anti-discrimination laws provide incomplete protection, and have the potential to create welfare-reducing distortions in incentives, while subsidies can be designed that mimic the efficiency of premium risk insurance. While the economic concepts behind these conclusions are well-documented and well-understood, I believe my own model adds value in the form of simplicity and …