Community Rating Is Not Economically Feasible

1065 Words Jul 31st, 2014 5 Pages
Community rating or risk equalization system would be regulated to provide equal service to any risk level consumer. Insurance companies will be forced to under provide at lower costs or provide standard service at rates that are unaffordable for many unless subsidized by government. Lower risk beneficiaries will have to compensate for higher risk consumers making it financially unviable. These would be issues in a normal competitive market, however in an ACA application, the concern for market decisions or risk selection is void anyway. So community rating would probably be appropriate in the type of policy.

2) State and explain whether or not community rating is equitable from the standpoint of both economics and risk - Community rating is not economically feasible. This concept takes the risk rating out of the policy decisions. Community rating or risk equalization system would be regulated to the point of financial unsustainability. Insurance companies will be forced to under provide at lower costs or provide standard service at rates that are unaffordable for many unless subsidized by government. Lower risk beneficiaries will have to compensate for higher risk consumers making it financially unviable. Insurers will find ways to attract the healthy consumers and somehow systematically avoid the sick.

3) In my opinion the important factors regarding Marginal analysis is marginal product, marginal revenue and marginal rate of substitution. Marginal…
Open Document