Health Insurance in Rural America: A Partial Equilibrium Analysis

Abstract

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 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 in 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.