How Well Does Employment-Based Health Insurance Pool Risk?

Award Year:
Mark Pauly
Health Insurance, Healthcare Markets
Private employment-based insurance pools some of the risk of high medical care expenses across individuals. How well it achieves protection against risk is not well known, but belief that pooling is imperfect especially for employment-based coverage furnished by small groups supports many actual and proposed insurance regulations, reforms, tax advantages, and explicit subsidies. Dr. Pauly undertakes an in-depth analysis of what is currently known about pooling risk in general and for firms of different sizes and workers of different characteristics. New information is generated on the level of pooling and its variation across firms and industry. The impact of government intervention, such as state insurance regulations, tax subsidies, and ERISA are examined. Knowing how well the current system works and where it functions with different degrees of effectiveness is highly useful to the design of minimally intrusive and cost-effective regulations to improve the efficiency and equity of the market.