<< Chapter < Page Chapter >> Page >

At its best, the largely private U.S. system of health insurance and healthcare delivery provides an extraordinarily high quality of care, along with generating a seemingly endless parade of life-saving innovations. But the system also struggles to control its high costs and to provide basic medical care to all. Other countries have lower costs and more equal access, but they often struggle to provide rapid access to health care and to offer the near-miracles of the most up-to-date medical care. The challenge is a healthcare system that strikes the right balance between quality, access, and cost.

Government regulation of insurance

The U.S. insurance industry is primarily regulated at the state level; indeed, since 1871 there has been a National Association of Insurance Commissioners that brings together these state regulators to exchange information and strategies. The state insurance regulators typically attempt to accomplish two things: to keep the price of insurance low and to make sure that everyone has insurance. These goals, however, can conflict with each other and also become easily entangled in politics.

If insurance premiums are set at actuarially fair levels, so that people end up paying an amount that accurately reflects their risk group, certain people will end up paying a lot. For example, if health insurance companies were trying to cover people who already have a chronic disease like AIDS, or who were elderly, they would charge these groups very high premiums for health insurance, because their expected health care costs are quite high. Women in the age bracket 18–44 consume, on average, about 65% more in health care spending than men. Young male drivers have more car accidents than young female drivers. Thus, actuarially fair insurance would tend to charge young men much more for car insurance than young women. Because people in high-risk groups would find themselves charged so heavily for insurance, they might choose not to buy insurance at all.

State insurance regulators have sometimes reacted by passing rules that attempt to set low premiums for insurance. Over time, however, the fundamental law of insurance must hold: the average amount received by individuals must equal the average amount paid in premiums. When rules are passed to keep premiums low, insurance companies try to avoid insuring any high-risk or even medium-risk parties. If a state legislature passes strict rules requiring insurance companies to sell to everyone at low prices, the insurance companies always have the option of withdrawing from doing business in that state. For example, the insurance regulators in New Jersey are well-known for attempting to keep auto insurance premiums low, and more than 20 different insurance companies stopped doing business in the state in the late 1990s and early 2000s. Similarly, in 2009, State Farm announced that it was withdrawing from selling property insurance in Florida.

In short, government regulators cannot force companies to charge low prices and provide high levels of insurance coverage—and thus take losses—for a sustained period of time. If insurance premiums are going to be set below the actuarially fair level for a certain group, some other group will have to make up the difference. There are two other groups who can make up the difference: taxpayers or other buyers of insurance.

Questions & Answers

what's marginal utility?
Abena Reply
the additional utility you get if you can consume one more unit of the good x
Luka
Thanks... then what's the law of diminishing marginal utility ?
Abena
The utility decreases with every unit you consume (most of the time). The first unit of consumption will therefore give you the highest utility. Sorry about my english
Luka
Okay... I understand now
Abena
Great!
Luka
hello room
Lawal
one of the leading industrial nations of the world ranking second in manufacturing output after the USA is a. Russia b. Germany c. Britain d. Japan
Lawal
china
Siddharth
japan
Siddharth
good morning
Lamin
hi
Rafiu
hi
nivedha
japan
Ylaine
morning
Adegboye
no other questions?
Ylaine
hii
Dipun
I am from India
Dipun
same question are not mentioned
Dipun
first you give my answer
Dipun
hi
adelakun
welcome
Ahmed
dipun naik
Ahmed
whats your question
adelakun
whats your question
adelakun
I am from India
Dipun
retype the questions
adelakun
marginal untility is the last point desire of a consumer that gets benefit from related good/ service.
Saboor
Why are some countries rich and why are some countries poor? . is poorness a human cause?
Yacquub
well several factors are included...it's not just because of human..
Ylaine
what is a correct reason
Vijay
Japan
Lawal
countries which are rich they are developed countries they have good resources minerals technology power knowledge to use the resources poor countries are under developing countries they have lack of resources, knowledge and if they have these so they dont know the use of these resources.
Siddharth
so these knowledgeable people move /migrate to the other rich/developed countries
Siddharth
Poverty of a country is also related to cultural, economical, and military domination. Usually, the dominant country imposes all of these powers when diplomatically needed or sometimes by force.
Ernest
You can also have considerable poverty in a rich country when such poverty is measured within sectors of its population. In other words, economic indicators can sometime mask such poverty.
Ernest
For example, the U.S.A. has a very high measure of GDP per capital, but millions of Americans ( a considerable amount are children) live in poverty.
Ernest
So poverty is not an easy social phenomenon to pin down neatly into one social realm or another.
Ernest
pls what is price ceiling
jasmine
its the max price a seller can charge for a product, mostly imposed by the government to protect the consumer
Luka
its the max price a seller can charge for a product, mostly imposed by the government to protect the consumer plus it must be imposed below the equilibrium price in order to be effective. A shortage will also be created after its imposition.
Zafar
can happiness be measured?
Ylaine
Happiness is too subjective to be measured as an economic phenomenon or reality. I think that happiness happens at several levels of the human condition: biological, psychological, intellectual and at the level of the soul. How can economic theory be scientific about it?
Ernest
about I have read of something called gross happiness index.
Ylaine
Germany
Arthur
What is economies of scale
Jeremiah Reply
In microeconomics, economies of scale are the sum of total costs saved or that a firm has advantage over its competitors due to its scale of operations. More specifically, it is the firm's cost savings per unit of output that it gains as its production increases in scale.
Ernest
one of the leading industrial nations of the world ranking second in manufacturing output after the USA is ......... a. Russia b. Germany c. Britain d. Japan
Lawal
what is supply of demand?
Joseph Reply
supply of demand?
Yuusuf
1)importance of internal trade. 2) international trade barriers 3) principles of international trade
umar Reply
how can tell me about the GDP
Mahmood
explain the basic economic concept using ppc ?
Nurul Reply
scarcity can be represented by imagining a country producing only 2 goods and the resources to do so are fixed, hence a choice must be made and how to divide the limited resources between the two goods. you can choose any combination of the two goods that fall directly on the curve which represents
Justin
maximum efficiency and the highest possible output at this point in time. if you choose to not utilize all the resources then you will be inefficient (not to your best ability) and produce below the curve. however if you have increases in technology or find new resources you can shift the curve out
Justin
Please what is meant by resources allocation
albert Reply
Please I need explanation about resources allocation
albert
what is cost
Mohit Reply
Cost:-is the sacrifice or measured price paid to acquire, produce or maintain a good or service
Yuusuf
exactly
Emmanuel
thanks
Yuusuf
To what extend is labour, capital, land and entrepreneur considered as free good
Prince
#what is public finance
Ryan Reply
public finance is the study of how the government generates and spends to facilitate the day to day operations. simply put its an analysis of the income/expenditure statement of the government and how it affects welfare
Justin
#kk fenks
Ryan
you say it all
Emmanuel
what is economic model
chantal Reply
it may differ as different economist model ,but as to me it is a formal presentation of economic theory.
miidhagaa
what are the factors affecting utility
Silas
compare the ways in which resources are allocated in market and command economies
stella Reply
is profit maximization the only6 objective of private sectors
Alain Reply
no
KOPO
it's so difference way
Gohaan
pls can u guys tell me y it not....
Alain
there is equally prestige, sales managment, to solve unemployment, to maximize capacity
Jacque
"in the private sector profit maximization is the main but not the only goal of the firm"discuss pls
Alain
what is the difference between a co-operative and joint stock copany
Ndi
a join stock company is one in which there is a large number of shareholders who provide the capital in varrying proportion while a cooperative society is a non profit making organization that is owned and directly control by it member.example are producers cooperative...
Alain
thank Alain Aji
Ndi
Another one what Is Nationalisation
Ndi
Nationalization is the process of transforming private assets into public assets by bringing them under the public ownership of a national government or state
Alain
that's right thanks
Ndi
and what is Nationalised industry
Ali
what are the principle of governing a cooperative
Ndi
these are business organizations,which were created by individuals but taken over by the government.
Ndi
i agree your opinion
Hi
Greetings
Dango
What's National income
Dango
reduction of risk also
Ibrahim
why is economics different from pure science...
Jacque Reply
it's because the methodology is scientific in nature,for example we have economics in geography,history,but with pure science it deal with the nature..
Alain
science uses logic to study and systematic method and economic uses practical methods to deal with d current economic scenario
shaikh
but it is said in general that it is a science ...why?
Jacque
because it only deals with human behavior
Ibrahim
Economics is a science since it use some scientific methods but not as pure science that's why it's refers as social science
Yuusuf
Mister Kay. Economics is a (Social) Science. It deals with human beings and uses a systematic and logical body of theories, laws and assumptions to study and interpret human behaviour in the face of choice making in an environment where resources are naturally scarce, insufficient or unavailable.
Kolawole
economics is considered different from the pure sciences such as chemistry and physics for the simple fact that it can't be isolated in a lab or test tube and studied. in economics we can't control all the variables and study the effect of the outcome of tweaking just one variable.
Justin
hence it's not a perfect science. to make up for this we use the assumption of ceterius paribus or holding all else constant. In the real world it's dynamic and we can't isolate for eg a change in income on demand holding all else constant (prices of goods, etc)
Justin
What is the relationship between quantity demanded and quantity supplied at equilibrium? What is the relationship when there is a shortage? What is the relationship when there is a surplus?
Sualihu Reply
When QS greater than QD, it costed the price to drop
Zeyi
equilibrium is the market price
Zeyi
at equilibrium, demand meets supply, thus a right price , good enough to ensure no waste of supply or shortage of demand
Foluso
The relationship between quantity demanded and quantity supplied at equilibrium is that there is satisfaction between supply and demand. Prices increases when there is increased in demand and vice versa.
Muhammad
what is expenditure of consumer
Patrick Reply
Consumer spending, consumption, or consumption expenditure is the acquisition of goods and services by individuals or families. It is the largest part of aggregate demand at the macroeconomic level. There are two components of consumer spending: induced consumption and autonomous consumption. ...
richard
found this hope it helps. :)
richard
how can we calculate price elasticity
Bijaya
okey thank you
Bijaya
How can we calculate price elasticity?
Sualihu
% change in qty demand over % change in price
Keith
the volume of people who are willing and able to pay for a good or a service
Shadreck Reply

Get the best Principles of economics course in your pocket!





Source:  OpenStax, Principles of economics. OpenStax CNX. Sep 19, 2014 Download for free at http://legacy.cnx.org/content/col11613/1.11
Google Play and the Google Play logo are trademarks of Google Inc.

Notification Switch

Would you like to follow the 'Principles of economics' conversation and receive update notifications?

Ask