Who gains and who loses with community rating for small business?

by Joan L. Buchanan, M. Susan Marquis

Purchase Print Copy

 FormatList Price
Add to Cart Paperback14 pages Free

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.

This report is part of the RAND Corporation reprint series. The Reprint was a product of the RAND Corporation from 1992 to 2011 that represented previously published journal articles, book chapters, and reports with the permission of the publisher. RAND reprints were formally reviewed in accordance with the publisher's editorial policy and compliant with RAND's rigorous quality assurance standards for quality and objectivity. For select current RAND journal articles, see External Publications.

The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.