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A Simple Model of Health Insurance Competition

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  • Alexander Kemnitz

Abstract

This paper investigates competition between health insurance companies under different financing regulations. We consider two alternatives advanced in recent German health care reform discussions: competition by contribution rates (health contributions) and by fees (health premia). We find that contribution rate competition yields lower company profits and higher consumer welfare than premia competition when switching between insurance companies is costly.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2010/wp-cesifo-2010-10/cesifo1_wp3220.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3220.

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Date of creation: 2010
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Handle: RePEc:ces:ceswps:_3220

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Keywords: health care reform; competition; consumer choice;

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  1. Vaithianathan, Rhema, 2006. "Health insurance and imperfect competition in the health care market," Journal of Health Economics, Elsevier, Elsevier, vol. 25(6), pages 1193-1202, November.
  2. Van Ourti, Tom & van Doorslaer, Eddy & Koolman, Xander, 2009. "The effect of income growth and inequality on health inequality: Theory and empirical evidence from the European Panel," Journal of Health Economics, Elsevier, Elsevier, vol. 28(3), pages 525-539, May.
  3. Breyer, Friedrich & Haufler, Andreas, 2000. "Health Care Reform: Separating Insurance from Income Redistribution," Munich Reprints in Economics, University of Munich, Department of Economics 20114, University of Munich, Department of Economics.
  4. Hans Fehr & Heinrich Jess, 2006. "Health premiums or health contributions? An evaluation of health care reform options in Germany," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, Duncker & Humblot, Berlin, vol. 126(1), pages 20-57.
  5. Wolfgang Buchholz, 2005. "A Note on Financing Health-Care Reform: Some Simple Arguments Concerning Marginal Tax Burden," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, Mohr Siebeck, Tübingen, vol. 61(3), pages 438-, November.
  6. Richard Frank & Karine Lamiraud, 2008. "Choice, Price Competition and Complexity in Markets for Health Insurance," NBER Working Papers 13817, National Bureau of Economic Research, Inc.
  7. Kurtis J. Swope & Eckhard Janeba, 2005. "Taxes or Fees? The Political Economy of Providing Excludable Public Goods," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 7(3), pages 405-426, 08.
  8. Mathias Kifmann, 2005. "Health insurance in a democracy: Why is it public and why are premiums income related?," Public Choice, Springer, Springer, vol. 124(3), pages 283-308, September.
  9. David M. Cutler & Sarah Reber, 1996. "Paying for Health Insurance: The Tradeoff between Competition and Adverse Selection," NBER Working Papers 5796, National Bureau of Economic Research, Inc.
  10. Wolfram F. Richter, 2009. "Germany goes ahead with Health Vouchers," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, Ifo Institute for Economic Research at the University of Munich, vol. 7(3), pages 53-60, October.
  11. Schubert, Stefanie & Schnabel, Reinhold, 2009. "Curing Germany's health care system by mandatory health premia?," Journal of Health Economics, Elsevier, Elsevier, vol. 28(5), pages 911-923, September.
  12. Fraser, Clive D., 1996. "On the provision of excludable public goods," Journal of Public Economics, Elsevier, Elsevier, vol. 60(1), pages 111-130, April.
  13. Bos, Dieter, 1980. "The Democratic Decision on Fees versus Taxes," Kyklos, Wiley Blackwell, Wiley Blackwell, vol. 33(1), pages 76-99.
  14. Eaton, Jonathan & Rosen, Harvey S, 1980. "Taxation, Human Capital, and Uncertainty," American Economic Review, American Economic Association, American Economic Association, vol. 70(4), pages 705-15, September.
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