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Improving Compliance With Preventive Care: Cooperation in Mutual Health Insurance

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  • F. Barigozzi
  • R. Bourles
  • D. Henriet
  • G. Pignataro

Abstract

Previous literature has shown that the monetary cost of preventive care should be subsidized in traditional insurance since policyholders ignore the impact of their prevention on the insurance premium. This paper analyses participating policies offered by mutual insurers as an alternative contract, encouraging prevention in health insurance. We show that, with participating policies, policyholders can fully internalize the benefit of their prevention choice on the premium. This occurs when cooperation among members of the pool can be sustained as an equilibrium in a repeated interaction game with uncertain horizon. A necessary condition is that the size of the pool must be sufficiently low.

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Paper provided by Dipartimento Scienze Economiche, Universita' di Bologna in its series Working Papers with number wp765.

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Date of creation: Jun 2011
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Handle: RePEc:bol:bodewp:wp765

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