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Efficient Transfer of Aging Provisions in Private Health Insurance

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  • Volker Meier

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Abstract

In German-style private health insurance contracts, aging provisions are used to flatten premium profiles. An individual would like to change insurer if she perceives a low service quality. The first-best optimum is characterized by provision transfers upon insurer changes which are higher for high risks and may be negative for low risks. Should the actual risk status not be verifiable, provision transfers have to be uniform. Efficient transfers will equalize consumption across periods and states if high risks are deterred from switching. Otherwise, the optimum transfer balances the distortion of incentives for high-risk and low-risk individuals.
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Suggested Citation

  • Volker Meier, 2005. "Efficient Transfer of Aging Provisions in Private Health Insurance," Journal of Economics, Springer, vol. 84(3), pages 249-275, May.
  • Handle: RePEc:kap:jeczfn:v:84:y:2005:i:3:p:249-275
    DOI: 10.1007/s00712-005-0121-2
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    References listed on IDEAS

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    1. Kifmann, Mathias, 2001. "Premium Risk and Managed Care," Journal of Risk and Uncertainty, Springer, vol. 22(3), pages 277-293, May.
    2. Florian Baumann & Volker Meier & Martin Werding, 2008. "Transferable Ageing Provisions in Individual Health Insurance Contracts," German Economic Review, Verein für Socialpolitik, vol. 9, pages 287-311, August.
    3. Igal Hendel & Alessandro Lizzeri, 2003. "The Role of Commitment in Dynamic Contracts: Evidence from Life Insurance," The Quarterly Journal of Economics, Oxford University Press, vol. 118(1), pages 299-328.
    4. Frick, Kevin D, 1998. "Consumer Capital Market Constraints and Guaranteed Renewable Insurance," Journal of Risk and Uncertainty, Springer, vol. 16(3), pages 271-278, July-Aug..
    5. Cochrane, John H, 1995. "Time-Consistent Health Insurance," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 445-473, June.
    6. Pauly, Mark V & Kunreuther, Howard & Hirth, Richard, 1995. "Guaranteed Renewability in Insurance," Journal of Risk and Uncertainty, Springer, vol. 10(2), pages 143-156, March.
    7. Bradley Herring & Mark Pauly, 2003. "Incentive-Compatible Guaranteed Renewable Health Insurance," NBER Working Papers 9888, National Bureau of Economic Research, Inc.
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    Citations

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    Cited by:

    1. Florian Baumann & Volker Meier & Martin Werding, 2008. "Transferable Ageing Provisions in Individual Health Insurance Contracts," German Economic Review, Verein für Socialpolitik, vol. 9, pages 287-311, August.
    2. Martin Werding & Stuart R. McLennan, 2015. "International Portability of Health-Cost Cover: Mobility, Insurance, and Redistribution," CESifo Economic Studies, CESifo, vol. 61(2), pages 484-519.
    3. Volker Meier & Martin Werding, 2007. "Übertragbarkeit risikoabhängiger Alterungsrückstellungen in der Privaten Krankenversicherung," ifo Forschungsberichte, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 38, October.
    4. Werding, Martin & McLennan, Stuart, 2011. "International portability of health-cost coverage : concepts and experience," Social Protection and Labor Policy and Technical Notes 63929, The World Bank.
    5. Rigmar Osterkamp, 2003. "Reform des deutschen Gesundheitswesens: Bürgerversicherung oder Pauschalbeiträge?," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 56(10), pages 11-14, May.
    6. Christine Arentz & Johann Eekhoff & Susanna Kochskämper, 2012. "Private health insurance: a role model for European health systems," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 13(5), pages 615-621, October.
    7. Volker Meier, 2003. "Solving the Premium Risk Problem, Insurer Switches, and Transfers of Aging Provisions," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 1(3), pages 20-23, October.
    8. Wasem, Jürgen & Buchner, Florian & Walendzik, Anke & Schröder, Michael, 2016. "Qualitative Analysen zur harmonisierten Berechnung einer Alterungsrückstellung und der verfassungskonformen Ausgestaltung ihrer Portabilität: Endbericht - Studie im Auftrag des Verbraucherzentrale Bun," IBES Diskussionsbeiträge 218, University of Duisburg-Essen, Institute of Business and Economic Studie (IBES).

    More about this item

    Keywords

    health insurance; premium risk; aging provisions; D91; G22; I18;

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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