Community rating and choice between traditional health insurance and managed care.
This paper analyses the consequences of allowing a choice between traditional insurance and managed care under community rating. A model of a competitive health insurance market is developed; with the risk equalization scheme being imperfect. There are two types of individuals who are characterized by different costs with respect to traditional insurance. Compared with a situation where traditional insurance is compulsory, allowing choice can make both types better off, can increase the utility of low-cost types at the expense of high-cost types, as well as having no effect. Inefficiencies under compulsory traditional insurance can be eliminated and new inefficiencies can be created. Market equilibria are not necessarily second best.
Kifmann
M
M
Universität Konstanz, Konstanz, Germany. mathias.kifmann@uni-konstanz.de
D002755:Choice Behavior; D004465:Economic Competition; D005060:Europe; D005249:Fees and Charges; D006297:Health Services Accessibility / Q000191:economics; D006801:Humans; D015273:Insurance Selection Bias; D007348:Insurance, Health / Q000191:economics*; D008329:Managed Care Programs / Q000191:economics*; D017059:Models, Econometric; D020379:Risk Adjustment