Recent Findings from Cornell University Provides New Insights into Managed Care (The Law of Large Umbrellas: Away From Risk Reduction In Health Insurance): Managed Care

2026 MAR 09 (NewsRx) -- By a News Reporter-Staff News Editor at Insurance Daily News -- A new study on Managed Care is now available. According to news reporting originating from Ithaca, New York, by NewsRx editors, the research stated, “Unlike other forms of insurance, such as auto, life, or commercial general liability, health insurance in the United States covers many risks that do not meet traditional criteria for insurability. A large margin of health care that we view as essential-including preventive care, care for preexisting conditions, and elective care-departs from actuarial principles of confining insurance to risks that are independent, probabilistic, and uncorrelated.”

Our news editors obtained a quote from the research from Cornell University, “Health insurance covers these risks for sound public health reasons, and decades of incremental change and political compromise have culminated in our choice to cover these through health insurance rather than general social spending. But channeling these expenses through health insurance, particularly through publicly subsidized private insurance, has contributed to terrifically high health care costs in the absence of price controls. Drawing on George Priest’s work in the economics of insurance, this essay argues that we have abandoned the ‘law of large numbers’ in favor of a ‘law of large umbrellas’-a choice to prioritize access to care by covering more people and more risks than would be possible under actuarial principles. But when people are left out in the rain-including the millions of people projected to lose insurance in the coming years-the high prices enabled by insurance are prohibitive.”

According to the news editors, the research concluded: “Revisiting Priest’s insights clarifies the economic and normative tradeoffs of this choice.”

This research has been peer-reviewed.

For more information on this research see: The Law of Large Umbrellas: Away From Risk Reduction In Health Insurance. Yale Journal On Regulation, 2025;42(3):1279-1312. Yale Journal On Regulation can be contacted at: Yale Journal On Regulation, 127 Wall Street, New Haven, CT 06511, USA.

The news editors report that additional information may be obtained by contacting Kristen Underhill, Cornell University, Law, Ithaca, NY 14853, United States.

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