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Imperfect risk adjustment, risk preferences, and sorting in competitive health insurance markets.
- Source :
-
Journal of Health Economics . Dec2017, Vol. 56, p259-280. 22p. - Publication Year :
- 2017
-
Abstract
- I develop a model of insurer price-setting and consumer welfare under risk-adjustment, a policy commonly used to combat inefficient sorting due to adverse selection in health insurance markets. I use the model to illustrate graphically that risk-adjustment causes health plan prices to be based on costs not predicted by the risk-adjustment model ("residual costs") rather than total costs, either weakening or exacerbating selection problems depending on the correlation between demand and costs predicted by the risk-adjustment model. I then use a structural model to estimate the welfare consequences of risk-adjustment, finding a welfare gain of over $600 per person-year. [ABSTRACT FROM AUTHOR]
Details
- Language :
- English
- ISSN :
- 01676296
- Volume :
- 56
- Database :
- Academic Search Index
- Journal :
- Journal of Health Economics
- Publication Type :
- Academic Journal
- Accession number :
- 126757079
- Full Text :
- https://doi.org/10.1016/j.jhealeco.2017.04.004