Health Care Reinsurance and Insurance Reform in the United States: A Simulation Model

This paper uses data from the Medical Expenditures Panel Survey, a U.S. health care survey, to simulate the impact of reinsurance on insured health care expenditures for different cohorts. The paper concludes that reinsurance would not eliminate potential risk selection by insurers and, even with reinsurance, specific cohorts would have trouble obtaining affordable insurance unless reinsurance was accompanied by significant changes to U.S. insurance laws including the adoption of guarantee issue requirements and the abolition of underwriting based on health status or pre-existing conditions. The simulation model reveals that the impact of reinsurance on insurance expenditures is larger for older cohorts than for younger cohorts.