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Community rating and choice between traditional health insurance and managed care
Author(s) -
Kifmann Mathias
Publication year - 1999
Publication title -
health economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.55
H-Index - 109
eISSN - 1099-1050
pISSN - 1057-9230
DOI - 10.1002/(sici)1099-1050(199911)8:7<563::aid-hec477>3.0.co;2-a
Subject(s) - actuarial science , imperfect , business , health insurance , insurance policy , risk pool , group insurance , auto insurance risk selection , health care , key person insurance , economics , general insurance , income protection insurance , linguistics , philosophy , economic growth
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. Copyright © 1999 John Wiley & Sons, Ltd.