Insuring Against Adverse Outcomes at Birth

Christopher Phelan, Consultant

December 2016 | Federal Reserve Bank of Minneapolis Economic Policy Paper 16-12

To what extent should government policy try to equalize economic outcomes due to differences among individuals in their most basic, innate circumstances: the kind of family they’re born into, their level of intelligence, their marketable talents, their health? Should policy tilt economic resources away from “genetic winners” and toward less fortunate newborns?

This paper points to the usefulness of considering different perspectives regarding at-birth risks. It argues that law and policy need to focus on allowing tools for parents to mitigate the real risk to themselves associated with having children of possibly different birth circumstances.

Specific policies would (a) allow deeper insurance markets (provided by private market or government) where parents-to-be would, in return for an insurance premium, receive a payment if their child is born with an expensive medical condition or disability, and (b) allow parents maximum discretion in formulating estate plans so as to provide for that child’s future needs.