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Community Rating And Health Insurance

Community Rating And Health Insurance

“Community Rating” is one of the most contradictory aspects of the recent healthcare overhaul bill, which is winding the way through the Congress. Although the term is soft to hear, but is fit for being disruptive.

Community Rating and health insurance are closely related. The term indicates the fact of claiming a fixed premium to every member of a heterogeneous health high risk pool. The members should have broadly differed healthcare spending for the enduring year. It without doubt makes persistently healthy people to get fund for their health insurance premiums (instead by means of open transfers and taxes) the medical care utilized persistently weaker people. Thus, the community rating and health insurance is related to each other.

The use of any sort of indemnity or insurance obviously is to reduce the monetary load from the unfortunate to fortunate members of a high risk pool.

Professor Uwe Reinhardt gives examples of two legions, A and B, presenting populations divided into two high risk pools with separate perils; as is features of the price-competitive industry for independently sold medical insurance.

  • Will it be 'reasonable' that the healthier people of legion A give an insurance premium of just 2,450 USD per year, while the sicker people of legion B should provide 6,600 USD per year? And, this is how the medical insurance is charged in majority of U.S. states to the residents.
  • Otherwise, does 'reasonability' need that the two legions be amalgamated into a single and larger federal high risk pool A & B, whose peril profile is illustrated in Reinhardt's table. If every member of the amalgamated risk pool is to provide the same amount of insurance premium, then the second one would have to 4,525 USD to manage. This type of premium is said to be 'community rated' over two separate high risk pools.

In relation to the premium in an absolutely risk-separated industry, community rated insurance premium of 4,525 USD will charge the individuals of lower-peril legion A 2,075 USD more; while the sicker individuals of legion B 2,075 USD lesser than they may have given in a risk-separated industry. Is that 'reasonable'? Community Rating and health insurance are inter-related over reasonability.

Therefore, what the statesmen of such unreal nation should do? It's actually the problem that the political persons are managing this time.

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