Adverse Selection and an Individual Mandate: When Theory Meets Practice.

ABSTRACT: We develop a model of selection that incorporates a key element of recent health reforms: an individual mandate. Using data from Massachusetts, we estimate the parameters of the model. In the individual market for health insurance, we find that premiums and average costs decreased significantly in response to the individual mandate. We find an annual welfare gain of 4.1% per person or $51.1 million annually in Massachusetts as a result of the reduction in adverse selection. We also find smaller post-reform markups.

SUBMITTER: Hackmann MB 

PROVIDER: S-EPMC4408001 | biostudies-literature | 2015 Mar

REPOSITORIES: biostudies-literature