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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

explain the Adam Smith law of economics
Daya Reply
critical use of tariffs and non tariffs on imports and exports.
Natukunda Reply
Is harmful
amin
is good I guess
Audrey
why is the marginal curve u shaped
jake Reply
which of marginal curve?
begyere
marginal cost curve
jake
critical use of tariffs and non tariffs on exports and imports
Natukunda
what is demand function
uju Reply
demand function is the mathematical representation of price and quantity demanded of goods and services at various prices at a given time .
King
Demand function is an equation which shows the mathematical relationship between the quantity demanded of a good and the values of the various determinants of demand.
Bon
why would division of labour without trade not work
Frederick Reply
as far there is an output as a goal... trade can't be exempted... because the sole reason for division of labour is for an effective and efficient output or outcome.. with such exchange trade has taken place. .
Agha-Aiguokhian
Please what is paradox of value
rakia
what is the features of monopoly market? how it is different from monopolistic market?
alisha
how does scarcity described as the efficient byway to allocate resources in a free market?
God Reply
scarcity gives or births a rational thinking to an individual or state economy in the distribution of revenue or income to the right channels of their ends... assuming the market has the features of a free market (free entry and exit, close substitutes, market price control etc)
Agha-Aiguokhian
wath is the meaning the macro economics
Jimcaale Reply
What is the way out of Scarcity
Samuel
a state referenced economic study, the manner or behavioural pattern of a state choice in making economic decisions in satisfying their ends
Agha-Aiguokhian
Thanks brother
Samuel
what is macro economics
Balogun
is the study of a national economy as a whole
Rhoda
thanks
Balogun
what is micro economics
Balogun
micro is not the study of the entire economy as a whole. that is macro economics.
Brock
micro focuses more on decisions that individuals and firms make but also uses examples of countries regarding production.
Brock
I think is why some people get mixed up.
Brock
thanks a lot
Balogun
yes ,I think that is right
rene
how would you use budget constraints to explain trade off?
begyere
what is the difference between wants and needs as in economics
rene
wants may be unlimited but needs have the limit on the base of effort to pay.
Dambar
who n who is d founder of economic. txn
Ojo
adam smith is the founder of modern economics but previous than we can read ununified economic thought of kautilya and others.
Dambar
thanx very much
rene
In economic, the idea of survival is real, meaning someone would die with out the needs being met.This includes things like food, water, and shelter. A wants, in economic, is one step up in the order from needs and is simply something that people desire to have, that they may, or may not, obtain.
Richlyn
In our place, we had a guy who started business by collecting funds from different people giving them back 15 percent of their money as monthly interest. He worked for 2 to 3 years. Then slowly he started reducing the monthly interest to 10 percent. just in not more than two weeks he started,,,,,,,,
Bona
claiming that his business has collapsed. what do you think is the secret behind this issue. what advice should you give to the victims. Cos most contributed 1000000 South Sudanese pounds.
Bona
when total utility is constant, marginal utility do what?
rasheed Reply
Why is it that whenever I ask a question no one hears me out
Dominic
😊😊
Konadu
This is deals with only 1producer 1producer 1consumer
Motasay Reply
Oligopoly
Gh
thanks for you answer
Qaasim
With two buyers n sellers
Motasay
nothing only I study
Qaasim
still oligopoly That is when there is a limited buyer and seller in the industry. There are no perfectly elastic market entry, that is for both the price taker and the seller
Gh
thanks for your advice
Qaasim
welcomed bro
Gh
we can ask our doubt also isn't
Rohit
Yea you can as well
Gh
Like "beauty opportunity cost lies in the eyes of the beholder"discuss with practical examples
Dominic
Criticism of scarcity definition
No Reply
life is all about scarcity. there is a big reason behind that
Hassan
tell me the whole
No
as we are Muslims
Hassan
so what
No
we believe that our Allah. the God of Universe is Examining each and every one on the planet this Scarcity. the only place there is no scarcity is Aakhiro Doomsday
Hassan
i want Explanation ?
No
theory
No
You have came back our book of Quran
Hassan
Make some of our basic needs not available. For example like if we need a particular drugs to cure a virus ohh disease because if the scarcity of it it may lead to death
Motasay
what men gdb
Jimcaale Reply
with men government demand price
Jimcaale
how to draw demand curve
Michael Reply
What are the distinction between trade off and opportunity cost?
Eric Reply
what is monopoly
Mary Reply
What are the sources of monopoly
Mary
Sources of Monopoly Power Monopoly power is influenced by the following factors: Barriers to entry Number of competitors Advertising Degree of product differentiation The larger and more expensive the barriers to entry the greater the monopoly power The smaller the number of competitors in th
edward
monopoly occurs when specific enterprise supplies goods and controls the market.
sade
i think the sources of monopoly are barriers to enrty and product differentiation.
sade
Monopoly is a market structure characterized by a single seller, selling a unique product in the market in which s/he faces no competition, as s/he is the sole seller of goods with no close substitute.
edward
Monopoly is a market structure where the production of goods and services coupled with price determination of such commodities are left in the hands of a sole producer. Such factors are; Perfectly inelastic competition, High market barricade, High cost of raw materials,
Gh
what is price discrimination monopoly
sandra Reply
Charging different sets of consumers different prirces for the same good or service, for reasons not involved in cost of production. There are 3 degrees of price discrimination.
Darren
what are the 3 degree
obed
hello
Oparaugo
What up guys
Divine
basic competitive model and the role of mechanism
SRIPRIYA Reply

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Source:  OpenStax, Principles of economics. OpenStax CNX. Sep 19, 2014 Download for free at http://legacy.cnx.org/content/col11613/1.11
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