This paper compares community rating with experience rating for small businesses using a microsimulation model to determine what firms offer and who within these firms purchase insurance. The authors generate four years of data and find that their results are remarkably stable through time. Both offer and purchase rates are about five percentage points higher under experience rating, but community rating leads to more stable offerings. Under community rating, high-risk firms and families purchase insurance, whereas under experience rating, it is the low-risk firms and families who are the purchasers. Young families and poor families have the lowest purchase rates, with these rates being disproportionately low under community rating.
Originally published in: Inquiry, v. 36, no. 1, Spring 1999, pp. 30-43.
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