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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

What is a monopsony?
Allan Reply
economic is tha process of banking
hashmat Reply
Pls can u explain it into details
Praise
Cause I don't understand what you are saying
Praise
brownies price is 5$ quantity demand is 5000$ supplied is 3000 if brownies are not taxed how many are consumed?
Fel Reply
what is unemployment
Rita Reply
ok so what would u say is supply in your own terms
Odessa Reply
Ok
fedaa
ya
Lal
why the demand curve is downwards sloping and supply upward sloping
Odessa Reply
the dd curve is downward sloping because consumers dd less when price is high and vice versa the ss curve is upward sloping suppliers are willing to produce more when prices are high
Clifford
what is dead weight loss
jeremy
when the prices of supplies slop upward then the prices of demand curve will increases downward
Kerubino
Why scarsity is considered to be very important in the study of economics
Sesay Reply
How can you solve the problem of scarcity
Sesay
If there is a enough quantitative the problem of scarcity would be solved.
Kerubino
what is demand
aliyu Reply
Demand refers to the quantities of a commodity which consumers are willing and are able to buy at given prices.
Okonji
demand is the number units of goods or services that buyers are willing and able to buy at verous prices
muhiyadiin
what is a full form of GDPCP?
Sadhna Reply
if the price of a commodity is at 6$, is the magnitude of the excess supply
Emma Reply
The quantity supplied at a price above or higher than $6 would be the excess supply
Elisha
2003, and $12,700 in Korea. Assume the growth rates for each country remain the same. 1. Compute the doubling time for
busywork
6$ the quantity remained the same
Sekou
write shirt note of the following terms normal goods
Adamu Reply
what is normal goods
Adamu
what is a full form of GDPCP?
Sadhna
evaluate measures to remove the deflationary gap?
Tinotenda Reply
State four importance of economics
School Reply
1) Economics help us to know how gouvernement,society, individuals and house holds allocate scarce resources 2)Economics help give us valable knowldge on daily decisions 3)Economics also help us to better understand economy 4)Economics help us better our daily life
Blessing
thank you dr
BLESSED
what is scarcity?
MCclean Reply
what is economics
MCclean
why is economics not consider as pure science?
Stanly
Economics is defined as science that studies human behaviour as a relation between ends and scarce means
School
Economics is not considered as pure science because it only deals with currency and human behaviour...
School
Scarcity refers to a limited supply of goods and services
School
What is Stock exchange?
Rock Reply
An exchange where security trading is conducted by professional stockbrokers
Bnysn
A place where scurity trading is conducted on an organised system
Blessing

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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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