Government-backed insurance lets smaller health plans offer lower prices

Government-backed reinsurance programs make it cheaper and less risky for health insurers to operate. This means smaller insurers can offer lower prices and compete more effectively against larger companies.

Health insurers usually add a "risk charge" to premiums to cover unexpected costs, making insurance more expensive. This paper shows that government-backed reinsurance directly reduces that risk charge. This allows insurers, especially smaller ones, to offer lower prices without just relying on direct subsidies. It means more competition in health insurance markets.