Incentives, incentives, incentives (and risk selection)

This is the first of a three-part series on the incentives involved in creating meaningful health care reform. If any major health care legislation is passed in the United States in 2009, it will almost certainly involve some form of an insurance exchange. This post focuses on why policymakers are eager to create an exchange and the detrimental impact of risk selection on true competition in an insurance exchange. The second post in the series will focus on adverse selection, and the third post will focus on over-differentiating insurance products and the need for consumer protection.