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A Political Economy Model of Health Insurance Policy


This paper aims to explain the divergent path of U.S. health policy from other high-income countries. The paper develops a general framework of interest group politics to study how the organization of industry can shape health insurance coverage and greater public involvement in health insurance. Large firms face a higher degree of unionization and provide more health coverage for employees than small firms. Consequently, large firms favor the adoption of a policy of universal health care coverage as a means of divesting health care costs to the public sector. Public aversion to higher taxation counterbalances this effect.

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  1. Most OECD countries achieved universal or near-universal health care coverage prior to 1990. The U.S., Mexico and Turkey are the only remaining exceptions (Docteur and Oxley 2003).

  2. This view is consistent with the historical concept of health insurance in the form of mutual aid societies of the late 19th century. Individual members of a mutual aid society would contribute small sums of money to a common fund that would then cover large expenses of some its members in need (see Bronstein (1996) and Stone (1993)).

  3. Breyer (2001) analyzes how redistributive components affect the extent of coverage in a compulsory insurance system in a model of direct democracy. The study compares the collectively financed health insurance systems in Germany and Switzerland.

  4. Allowing for corporate taxation would reinforce the positive relationship between greater public involvement in health coverage and increased costs to small firms since smaller firms tend to be less internationally mobile and hence more likely to bear the burden of taxation.

  5. This is despite efforts by most states between 1990 and 1995 to introduce regulations aimed at making health insurance more available to small firms (see Stream (1999) for details of state regulatory reforms).

  6. See for example U.S. Department of Labor (1998), Freeman (1981), Freeman and Medoff (1984).


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Correspondence to Alena Kimakova.

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Kimakova, A. A Political Economy Model of Health Insurance Policy. Atl Econ J 38, 23–36 (2010).

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  • Health insurance policy
  • Health care coverage
  • Political economy


  • P16
  • I18
  • H51