By Linda Blumberg and Justin Giovannelli
Health insurance works by spreading the cost of health benefits and services across a group of people who all face some chance of needing care. The process through which the composition of the group is determined, and these expected costs are shared, is called risk pooling.
Risk pooling can be broad, spreading costs across a group that reflects the population as a whole and includes people who are currently healthy and people who are not. Or pooling can be more limited, in which case less risk is spread and individuals who are at relatively high risk of needing health care bear more of the costs on their own.
Risk pooling and risk segmentation reflect different philosophical approaches to paying for health care, and policies that advance one approach will produce very different outcomes, in terms of consumers’ ability to access and afford care, than policies oriented toward the other.
In a new explainer for the Commonwealth Fund, Linda Blumberg and Justin Giovannelli discuss how risk pooling and risk segmentation affect affordability and how these concepts inform our understanding of recent federal changes to the ACA marketplaces and Medicaid.
Read the full blog post here.