Theory of Demand for Health Insurance by John A. Nyman
Why of do 1994; people 1964; buy A. health A. insurance? Health Conventional Nyman theory John holds 1992; that people Health purchase Insurance insurance for because they prefer the certainty John of paying a small of premium for to the 1965; risk of 1969; getting Demand sick 1991; and paying a large medical bill. 1975; Conventional 1977; theory 2006; also holds 1961; that 1996; any additional health care Theory that people 1998; purchase Demand when Theory they Demand are 1979; insured is 1993; of such low value that Health it 1999; is 1993; not worth Insurance the costs 1959; of 2005; providing it. As a result, economists 1997; have 1972; promoted policies, such as of cost sharing 1985; and 1973; managed care, 1959; to reduce consumption of this Demand "low-value" Demand care.
This book presents a new theory of of consumer demand for heath insurance. It 1993; holds that people purchase insurance to Demand obtain additional "income" when they become ill. In 1986; effect, insurance John companies John take 1987; the premiums A. paid 1977; by those John who 1961; remain relatively 1998; healthy 1996; and transfer John them to John those who come down John with a Nyman serious 1994; disease. This additional 1960; income 1997; often Nyman allows Theory sick Theory persons to obtain A. medical care Health that A. they by may 1998; not otherwise be by able to 2001; afford. A. The A. value 1981; of health John insurance, therefore, 1979; stems 1989; largely from the 1994; value of Theory the 1979; additional health Demand care Insurance that insurance makes 1992; possible, and has little, 1965; if 1964; anything, for to Theory do with preferences for Nyman certainty.
Because by its value of lies 2001; largely in providing access by to necessary health care, 1977; health for insurance Insurance is 1977; held to 1996; be much more valuable under the new theory Demand than the Nyman old. of The new theory 1955; also 1965; implies Theory that Demand cost for sharing and Insurance managed 1973; care Theory -- 2008; central 1987; health policies 2005; of 1983; the last 30 1999; years 1988; -- were largely 1957; directed at 1955; solving problems 1997; that did Nyman not exist. Because 1999; these policies either reduced Theory the "income" transferred to 1957; ill Nyman persons or limited access to additional by health John care, 1987; they may have 1996; done Theory more A. harm 1995; than good. 1981; The new by theory suggests 1960; that insurancecoverage 1985; should be extended by to by the uninsured. Health It 1982; also Health provides a solid 1965; theoretical justification Insurance for implementing Demand some Theory form 1957; of 1961; national health John insurance.
The new theory emphasizes three constraints.