Health Economics (The Pearson Series in Economics) by Charles E. Phelps

Author:Charles E. Phelps [Phelps, Charles E.]
Language: eng
Format: epub
ISBN: 9781315510675
Publisher: Taylor and Francis
Published: 2016-04-14T05:00:00+00:00

The Patient Protection and Affordable Care Act: Prelude

The “health reform” act of 2010 (PPACA) deals with these issues through two mechanisms that we further analyze later in this book. These two mechanisms are (1) a requirement that all individuals have some form of health insurance (at least as good as defined in the Act) and (2) a rule prohibiting all health insurers from using preexisting medical conditions either to determine the premium paid by individuals (“experience rating”) or to preclude coverage for those preexisting conditions. In order to understand the importance of these two PPACA components, we must better understand how health insurance markets would normally work without such rules. Thus, the next section discusses this issue, known in the insurance world as a “separating equilibrium.” The issue of preexisting conditions is also closely related to an insurance pricing mechanism known as “community rating” (that is, not experience rating). Thus, we also study community rating as a way to understand the preexisting condition rule in the PPACA.

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