Controlling selection incentives when health insurance contracts are endogenous
نویسنده
چکیده
The paper examines the nature of health insurance contracts when insurance companies pool highand low-risk individuals. In a spatial product differentiation model, the normal forces of competition induce quality provision, but selection incentives induce insurers to under-provide quality. To offset selection incentives, the government can reimburse some of the insurers’ costs. However, such a subsidy can in some cases reduce quality further, as well as discourage production efficiency. In such cases the optimal reimbursement rate is negative. 2001 Elsevier Science B.V. All rights reserved.
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