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Optimal Ex Post Risk Adjustment in Markets with Adverse Selection

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  • Anastasios Dosis

    (ESSEC Business School)

Abstract

This paper studies general health insurance markets. It proposes an ex post risk adjustment scheme that discourages risk selection and promotes efficient competition. Under the proposed risk adjustment scheme, the regulator engages in transfers that are conditional on the ex post profits of insurers. The risk adjustment scheme is entirely budget balanced, as it does not call for government subsidies, and requires the regulator to hold minimal information to implement it. Equilibrium is shown to exist and be efficient in any environment with a finite number of types and states even if single-crossing is not satisfied.

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  • Anastasios Dosis, 2019. "Optimal Ex Post Risk Adjustment in Markets with Adverse Selection ," Working Papers hal-02130442, HAL.
    • Handle: RePEc:hal:wpaper:hal-02130442
    Note: View the original document on HAL open archive server: https://essec.hal.science/hal-02130442
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    More about this item

    Keywords

    Health insurance; Risk selection; Risk adjustment; Efficiency;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • I10 - Health, Education, and Welfare - - Health - - - General
    • 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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