Coinsurance vs. Copayments: Reimbursement Rules for a Monopolistic Medical Product with Competitive Health Insurers

This paper studies a market for medical product in which there is perfect competition among health insurers, while the good sold by monopolist. Individuals differ their severity of illness and ex post moral hazard. We consider two regimes: one insurers use coinsurance rates (ad valorem reimbursements) copayments (specific reimbursements). show that induced equilibrium with involves lower producer price higher level welfare consumers. results provides strong support reference based reimbursement policy.