Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/285132 
Year of Publication: 
2019
Citation: 
[Journal:] Health Economics Review [ISSN:] 2191-1991 [Volume:] 9 [Issue:] 19 [Year:] 2019 [Pages:] 1-15
Publisher: 
Springer, Heidelberg
Abstract: 
Background: The cost of rural health continues to be high in the United States despite an overall improvement in national health insurance enrolment. Stakeholder's perception of adverse selection remains a paramount culprit in the challenges of rural insurance markets. Risk attitude has been revealed as an alternative for measuring this phenomenon, given the 2014 prohibition law on pre-existing conditions and a subsequent repeal in 2018 accompanied by extensive debate among congress. We examine the existence of adverse selection in rural insurance markets by comparing the effects of pre-existing or chronic health conditions and risk attitudes in a Principal-Agent model. Results: Using multinomial logit and complementary log-log binomial link models in a Principal-Agent framework, our results indicate that there is adverse selection in rural health insurance markets if pre-existing conditions are considered, but risk attitudes yield contrary effects. Conclusions: The major policy implication from this study is that respondents who have pre-existing/chronic conditions tend to patronise health insurance with a higher probability than other counterparts and therefore insurers are likely to incur losses given the law on pre-existing conditions as private information. The 2018 law on the exclusion of individuals with pre-existing conditions may be beneficial to the insurance companies at the expense of the populace. Hence, we suggest that market incentive-based programs should be encouraged to minimize rural health uninsurance.
Subjects: 
Pre-existing conditions
Principal-agent model
Rural health uninsurance
Complementary log-log binomial
Spence-Mirrlees condition
JEL: 
D82
I11
I13
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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