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Health Insurance without Single Crossing: why healthy people have high coverage

Author

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  • Boone, Jan
  • Schottmüller, Christoph

Abstract

Standard 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.

Suggested Citation

  • 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.
    • Handle: RePEc:cpr:ceprdp:8501
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    Citations

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    Cited by:

    1. Boone, Jan, 2019. "Health provider networks with private contracts: Is there under-treatment in narrow networks?," Journal of Health Economics, Elsevier, vol. 67(C).
    2. Boone, Jan, 2018. "Basic versus supplementary health insurance: Access to care and the role of cost effectiveness," Journal of Health Economics, Elsevier, vol. 60(C), pages 53-74.
    3. Boone, Jan, 2020. "Pricing above value: selling to an adverse selection market," CEPR Discussion Papers 15279, C.E.P.R. Discussion Papers.
    4. Bilancini, Ennio & Boncinelli, Leonardo, 2018. "Signaling to analogical reasoners who can acquire costly information," Games and Economic Behavior, Elsevier, vol. 110(C), pages 50-57.
    5. Boone, Jan, 2020. "Pricing above Value: Selling to an Adverse Selection Market," Discussion Paper 2020-023, Tilburg University, Center for Economic Research.
    6. Boone, Jan, 2020. "Pricing above Value: Selling to an Adverse Selection Market," Other publications TiSEM 700b2f3e-d1c8-4422-9b54-f, Tilburg University, School of Economics and Management.
    7. Boone, Jan, 2020. "Pricing above Value: Selling to an Adverse Selection Market," Other publications TiSEM eda6a1de-4db6-49a6-87e4-3, Tilburg University, School of Economics and Management.
    8. Christina Aperjis & Filippo Balestrieri, 2017. "Loss aversion leading to advantageous selection," Journal of Risk and Uncertainty, Springer, vol. 55(2), pages 203-227, December.

    More about this item

    Keywords

    Health insurance; Risk adjustment; Single crossing;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets

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