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A Note on Health Insurance under Ex Post Moral Hazard

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  • Pierre Picard

    (Department of Economics, Ecole Polytechnique, 91128 Palaiseau Cedex, France)

Abstract

In the linear coinsurance problem, examined first by Mossin (1968), a higher absolute risk aversion with respect to wealth in the sense of Arrow–Pratt implies a higher optimal coinsurance rate. We show that this property does not hold for health insurance under ex post moral hazard; i.e., when illness severity cannot be observed by insurers, and policyholders decide on their health expenditures. The optimal coinsurance rate trades off a risk-sharing effect and an incentive effect, both related to risk aversion.

Suggested Citation

  • Pierre Picard, 2016. "A Note on Health Insurance under Ex Post Moral Hazard," Risks, MDPI, vol. 4(4), pages 1-9, October.
    • Handle: RePEc:gam:jrisks:v:4:y:2016:i:4:p:38-:d:81350
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    References listed on IDEAS

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    Cited by:

    1. Pierre Martinon & Pierre Picard & Anasuya Raj, 2018. "On the design of optimal health insurance contracts under ex post moral hazard," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 43(2), pages 137-185, September.

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    More about this item

    Keywords

    health insurance; ex post moral hazard; coinsurance;
    All these keywords.

    JEL classification:

    • C - Mathematical and Quantitative Methods
    • G0 - Financial Economics - - General
    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics
    • M4 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting
    • K2 - Law and Economics - - Regulation and Business Law

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