What risks should health insurance mitigate? American health scholars, politicians, and the public at large answer this question ambivalently. This Article defines three dominant conceptions of health insurance that weave throughout popular and academic discourse and that echoed in the 2010 health reform debates. The first conception is that health insurance should primarily serve to mitigate harms to health. This “Health Promotion” theory relies on using health insurance to pay for medical care that most cost-effectively preserves and improves health. Alternately, health insurance might primarily mitigate risks to wealth from high medical care costs. This “Financial Security” theory demands that health insurance limit financial insecurity from these costs. Finally, the “Brute Luck” theory, highly sensitive to the possibility of adverse-incentive effects arising from moral hazard, demands that health insurance protect primarily against unavoidable or “chance” health risks that do not arise from individual behavior. This last theory thus seeks to preserve incentives for insureds to prevent risk themselves, while insurance neutralizes harms from random poor health.Each theory implies distinct principles to guide premium pricing and allocation of premium dollars toward medical care.
The new health reform law, the Patient Protection and Affordable Care Act of 2010 (PPACA), manifests this “conceptual pluralism.” It evokes all three of these notions of the types of risks Americans should share – now more collectively post-reform – through insurance. While the goals of these three theories dovetail at times (e.g., promoting health will in some cases also reduce medical care costs), at other times they are at odds. Conceptual pluralism thus complicates implementation of PPACA as regulators must manage tensions and make tradeoffs among these goals.
The framework offered in this Article is important for two reasons. First, creating a roadmap to understand the different conceptions of insurance, and the values that inform them, brings awareness to the root cause of tensions that will arise as PPACA is implemented. Second, this framework elucidates the different ends that health insurance could serve and thus enables clearer future reflection and debate on what ends it should serve and to what degree.
Hoffman, Allison K., "Three Models of Health Insurance: The Conceptual Pluralism of the Patient Protection and Affordable Care Act" (2011). Faculty Scholarship at Penn Law. 1878.