Suppose that in response to learning that some sick individuals were denied health insurance, the government...

Suppose that in response to learning that some sick individuals were denied health insurance, the government mandates that insurance companies offer insurance to everyone at unregulated rates.

Part A: Do you think that this would help reduce the number of uninsured? Explain.

Part B: An alternative strategy for reducing the number of uninsured might be to mandate that insurance companies charge individuals with health problems no more than individuals without health problems. Would this help reduce the number of uninsured? Explain.

Expert Solution

Part A:

Government has mandated that insurance companies offer insurance to everyone, but at unregulated rates. In this case, insurance companies can charge whatever rate they want to charge. So they'll simply charge much higher rates from sick individual. These higher rates might not be feasible for all sick individuals. So, I do not think that this would help reduce the number of uninsured.

Part B:

If insurance companies are mandated to charge the same price from everyone, irrespective of their health status, then firms, in order to remain profitable and cover their costs, will increase the insurance premium rates. This will make insurance premium rates unaffordable for some individuals (who might be "healthy" and earlier paying less charges). So, this would also not help reduce the number of uninsured.

Rahul Sunny answered 2 years ago

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