Improving health insurance markets: cost efficiency, implementation, and financing of expanding association health plans

Jordan Alzubi (), Derrick Fung (), Charles Yang () and Jason Yeh ()
Additional contact information
Jordan Alzubi: National Taiwan Normal University
Derrick Fung: The Hang Seng University of Hong Kong
Charles Yang: Florida Atlantic University
Jason Yeh: The Chinese University of Hong Kong

Review of Quantitative Finance and Accounting, 2022, vol. 59, issue 2, No 8, 694 pages

Abstract: Abstract This research investigates whether and how expanding association health plans (AHPs) would generate more cost savings and enhance availability and affordability in the individual health insurance markets. In our analyses, we extend the AHP’s commonality of interest to include geographic proximity and form hypothetical statewide AHPs. We use modified context-dependent traditional and slack-based data envelopment analysis models from various perspectives of stakeholders. We find that, by structuring and operating the expanded individual AHPs following the efficient practices of large-group plans, significant premium and expense reductions would be achieved while preserving the health benefits compliant with the Affordable Care Act. We recommend each insurer create a statewide pseudo-association to pool all its individual enrollees and offer them a large-group health plan; and suggest a hybrid experience and retrospective approach to improve the AHPs’ operations through efficiency-aligned optimizations of premiums and health expenditures, with cross-subsidies from an individual guaranty fund. We find that the efficiency-based cross-subsidies from group plans would significantly reduce government subsidies to the individual health insurance markets.

Keywords: Data envelopment analysis; Cost efficiency; Association health plans; Individual health insurance; Health expenditures (search for similar items in EconPapers)
JEL-codes: H51 I11 I13 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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DOI: 10.1007/s11156-022-01054-y

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