Optimal cost reimbursement of health insurers to reduce risk selection
AbstractIn the absence of a perfect risk adjustment scheme, reimbursing health insurers' costs can reduce risk selection in community-rated health insurance markets. In this paper, we develop a model in which insurers determine the cost efficiency of health care and have incentives for risk selection. We derive the optimal cost reimbursement function, which balances the incentives for cost efficiency and risk selection. For health cost data from a Swiss health insurer, we find that an optimal cost reimbursement scheme should reimburse costs only up to a threshold. Copyright (C) 2010 John Wiley & Sons, Ltd.
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Bibliographic InfoArticle provided by John Wiley & Sons, Ltd. in its journal Health Economics.
Volume (Year): 20 (2011)
Issue (Month): 5 (May)
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Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/5749
health insurance ; risk selection ; cost reimbursement ; risk adjustment ;
Other versions of this item:
- Kifmann, Mathias & Lorenz, Normann, 2005. "Optimal cost reimbursement of health insurers to reduce risk selection," Discussion Papers, Series 1 329, University of Konstanz, Department of Economics.
- H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
- I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
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