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Equity and efficiency effects of flat premiums

Author

Listed:
  • Cristian Pardo

    (Saint Joseph’s University)

  • Jorge Sabat

    (Universidad Andres Bello)

Abstract

This paper analyzes the impact of flat premiums on equity and efficiency within a regulated market. We examine the consequences of shifting from a risk-adjusted premium model to a flat premium system, particularly focusing on how this shift affects different income groups and market efficiency. Using a combination of theoretical modeling and empirical analysis, we find that flat premiums may lead to increased cross-subsidization among participants, with notable effects on both equity and efficiency. Our results suggest that while flat premiums simplify the regulatory framework, they also introduce trade-offs that policymakers must carefully consider.

Suggested Citation

  • Cristian Pardo & Jorge Sabat, 2025. "Equity and efficiency effects of flat premiums," International Journal of Health Economics and Management, Springer, vol. 25(1), pages 27-49, March.
    • Handle: RePEc:kap:ijhcfe:v:25:y:2025:i:1:d:10.1007_s10754-024-09388-x
    DOI: 10.1007/s10754-024-09388-x
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    More about this item

    Keywords

    Household finance; Health reform; Welfare analysis;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private

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