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

Cremer, Helmuth; Lozachmeur, Jean-Marie

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

Helmuth Cremer and Jean-Marie Lozachmeur

No 9160, CESifo Working Paper Series from CESifo

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

Keywords: ex post moral hazard; health insurance competition; copayments; imperfect competition (search for similar items in EconPapers)
JEL-codes: I11 I13 I18 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-com, nep-hea and nep-ias
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_9160

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