Question

One of the major difficulties facing the health insurance industry is that the people who are young and healthy see no need to buy insurance. The result of this tendency is that the people who want health insurance are the people that the insurance companies have the least desire to insure. The government's solution under the Affordable Care Act (also known as Obamacare )was to simply mandate that all people must have health insurance. Unfortunately , this mandate did not yield the hoped for results of keeping one's doctor and cutting medical expenditures by $2,500 per family per year. ( Infact, premiums have been rising. ) Thus more reform is being talked about Please explain the economic impact of the following reform proposals 1. Decouple insurance from employment (allowing people to shop for their own insurance like we do for car insurance ). 2. Allow insurance companies to screen applicants . 3. Allow consumers to signal that they are low -risk through the purchase of high-deductible policies 4. Allow insurance companies to conduct business across state lines.

Answer 1

The different reforms in the healthcare insurance sector will have different impact on the economy which we can see individually.

1. Decouple insurance from employment - This means that people will not be provided or forced to take insurance from the workplace they can buy their own health insurance. If this policy is adopted than people will not be forced to buy health insurance and they can choose whether to get one or not or if to get which one and from where? These all things will lead a person either not to buy an insurance or buy one with less premium and hence when they fall ill they will incur a huge cost of treatment. So this will lead to a small saving ( not paying health insurance premium) at present but a huge cost in future.
2. Allow insurance companies to screen applicants - If insurance companies are allowed to do so they will try to sell insurance only to healthy people where there is less probability to incur a huge cost. This will lead the insurance market in opposite direction, all unneeded persons will be insured and all needed persons will be left out. The main economic impact of this reform will be huge cost of treatment incurred by the persons not having health insurance, and a large profit to the insurance companies.
3. Allow consumers to signal that they are low risk through the purchase of high deductible policies - If consumers can show that they are low risk by taking insurance policies with lower premiums, this will also help the insurance providers as they will come to know the risk associated with the particular customer and hence the overall cost of insurance and other costs incurred will be low.
4. Allow insurance companies to conduct business across the state lines - If insurance companies will be allowed to conduct business across the state, the insurance sector will become competitive due to increase in the number of firms and this competition will lead to the introduction of cheaper policies with low premium and higher return in future. So this will overall decrease the amount of money spent on the health is a person.