Senior Fellow John Goodman: As everyone acknowledges, community rating creates horrible perverse incentives for everyone. On the buyer side, people have an incentive to refrain from insuring until they get sick. Once they do decide to buy, those who are charged an artificially low premium will over-insure. People who are over-charged will under-insure. Insurers will seek to attract the healthy and avoid the sick. After enrollment, their incentive will be to over-provide to the healthy and under-provide to the sick.
Posted on: Wed, 22 Jan 2014 02:00:01 +0000
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