Health Insurance without Single Crossing: Why Healthy People have High Coverage
AbstractStandard insurance models predict that people with high (health) risks have high insurance coverage. It is empirically documented that people with high income have lower health risks and are better insured. We show that income differences between risk types lead to a violation of single crossing in the standard insurance model. If insurers have some market power, this can explain the empirically observed outcome. This observation has also policy implications: While risk adjustment is traditionally viewed as an intervention which increases efficiency and raises the utility of low health agents, we show that with a violation of single crossing a trade off between efficiency and solidarity emerges.
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Bibliographic InfoPaper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2011-095.
Date of creation: 2011
Date of revision:
Contact details of provider:
Web page: http://center.uvt.nl
Health insurance; single crossing; risk adjustment;
Other versions of this item:
- Boone, Jan & Schottmüller, Christoph, 2011. "Health Insurance without Single Crossing: why healthy people have high coverage," CEPR Discussion Papers 8501, C.E.P.R. Discussion Papers.
- Boone, J. & Schottmuller, C., 2011. "Health Insurance without Single Crossing: Why Healthy People have High Coverage," Discussion Paper 2011-037, Tilburg University, Tilburg Law and Economic Center.
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-09-16 (All new papers)
- NEP-HEA-2011-09-16 (Health Economics)
- NEP-IAS-2011-09-16 (Insurance Economics)
- NEP-UPT-2011-09-16 (Utility Models & Prospect Theory)
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