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Incentives for Voluntary Disclosure of Quality Information in HMO Markets
Author(s) -
Jung Kyoungrae
Publication year - 2010
Publication title -
journal of risk and insurance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.055
H-Index - 63
eISSN - 1539-6975
pISSN - 0022-4367
DOI - 10.1111/j.1539-6975.2009.01339.x
Subject(s) - incentive , voluntary disclosure , business , adverse selection , turnover , quality (philosophy) , information asymmetry , selection (genetic algorithm) , empirical evidence , actuarial science , public economics , accounting , economics , finance , microeconomics , philosophy , epistemology , computer science , management , artificial intelligence
This study examines incentives for voluntary disclosure of quality information by health maintenance organizations (HMOs). Economic theory predicts complete voluntary disclosure without mandatory rules. This article introduces plans’ selection motives to avoid high‐risk consumers as a deterrent of full unraveling; if disclosure is expected to attract high‐risk members, plans have incentives to withhold information. The empirical analysis shows that while market unraveling was an important mechanism to bring disclosure, it was not complete, and plans in markets with high‐risk consumers were less likely to disclose. This study suggests that market unraveling may not arise if risk selection incentives are prevalent.