Consumer Response to a National Marketplace for Individual Insurance. Calculate simulation premiums

06/28/2008

The second step in the analysis requires the calculation of premiums adjusted for the effects of state regulations.  The basic idea behind a national market is that a person living in State A will be able to buy insurance licensed in State B.  Suppose I live in State A where the premium is $100 per month.  This reflects the influence of my state’s medical practice style and provider prices (which would not change if I bought insurance in State B) and the effects of regulations (which would change).  If I bought insurance in State B, the premium would be $100 minus the effects of fewer regulations in State B.    
 
To implement this step, we relied on the premiums reported by Congdon, Kowalski, and Showalter (2005).  These premiums were first adjusted by age and sex to reflect standard actuarial differences in health care costs, and then adjusted by the effects of regulations as summarized in Appendix 3.  The adjusted premiums were used as inputs into the insurance take-up simulation model.

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