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Health insurance, market power, and social welfare
Author(s) -
Liang Run,
Wang Hao
Publication year - 2017
Publication title -
international journal of economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.351
H-Index - 11
eISSN - 1742-7363
pISSN - 1742-7355
DOI - 10.1111/ijet.12137
Subject(s) - self insurance , health care , outcome (game theory) , welfare , health insurance , actuarial science , key person insurance , group insurance , economics , general insurance , social welfare , business , social insurance , insurance policy , public economics , microeconomics , economic growth , market economy , political science , law
This paper considers the welfare effects of health insurance. With a rather general model, we show that the presence of traditional health insurance makes consumers worse off when the marginal cost of health care is low enough, while always making the health care provider better off. The presence of traditional health insurance increases social welfare, but cannot achieve the socially optimal outcome. Furthermore, we consider a market structure called “integrated health insurance” and show that in a health care market where a firm provides not only health care but also health insurance, the socially optimal outcome can be achieved.