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Coinsurance vs. copayments: reimbursement rules for a monopolistic medical product with competitive health insurers

Author

Listed:
  • Cremer, Helmuth
  • Lozachmeur, Jean-Marie

Abstract

This paper studies a market for a medical product in which there is perfect competition among health insurers, while the good is sold by a monopolist. Individuals differ in their severity of illness and there is ex post moral hazard. We consider two regimes: one in which insurers use coinsurance rates (ad valorem reimbursements) and one in which insurers use copayments (specific reimbursements). We show that the induced equilibrium with copayments involves a lower producer price and a higher level of welfare for consumers. This results provides strong support for a reference price based reimbursement policy.

Suggested Citation

  • Cremer, Helmuth & Lozachmeur, Jean-Marie, 2021. "Coinsurance vs. copayments: reimbursement rules for a monopolistic medical product with competitive health insurers," CEPR Discussion Papers 16238, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:16238
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    Cited by:

    1. is not listed on IDEAS
    2. Brekke, Kurt R. & Straume, Odd Rune & Siciliani, Luigi, 2025. "Public coverage of dental care: universal or targeted?," Discussion Paper Series in Economics 2/2025, Norwegian School of Economics, Department of Economics.
    3. Cremer, Helmuth & Lozachmeur, Jean-Marie, 2025. "Nonlinear reimbursement rules for preventive and curative medical care," Journal of Health Economics, Elsevier, vol. 103(C).

    More about this item

    Keywords

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    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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