  Community rating is a policy that mandates uniform premium regardless of the
risk factors. In this paper, our focus narrows to the single contract
interpretation wherein we establish a theoretical framework for community
rating using Stiglitz's (1977) monopoly model in which there is a continuum of
agents. We exhibit profitability conditions and show that, under mild
regularity conditions, the optimal premium is unique and satisfies the inverse
elasticity rule. Our numerical analysis, using realistic parameter values,
reveals that under regulation, a 10% increase in indemnity is possible with
minimal impact on other variables.
