Consumer information surplus and adverse selection in competitive health insurance markets: an empirical study.
If premiums for health insurance are not risk related, there exists a consumer information surplus that may result in adverse selection. Our results indicate that insurers can greatly reduce this surplus by risk-adjusting the premium. We conclude that there need not be any substantial unavoidable consumer information surplus if consumers can choose whether to take a deductible for a one- or two-year health insurance contract with otherwise identical benefits. Therefore, adverse selection need not be a problem in a competitive insurance market with risk-adjusted premiums or vouchers and with such a consumer choice of health plan.
van de Ven
W P
WP
Department of Health Policy and Management, Erasmus University, Rotterdam, The Netherlands.
van Vliet
R C
RC
D000206:Actuarial Analysis; D003256:Community Participation / Q000191:economics*; D003365:Costs and Cost Analysis; D003669:Deductibles and Coinsurance; D004465:Economic Competition; D005249:Fees and Charges; D015273:Insurance Selection Bias; D007348:Insurance, Health / Q000191:economics*; D015233:Models, Statistical; D009426:Netherlands; D012308:Risk Management