Health Insurance without Single Crossing: why healthy people have high coverage

Jan Boone and Schottmüller, Christoph
Authors registered in the RePEc Author Service: Christoph Schottmüller

No 8501, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Standard insurance models predict that people with high (health) risks have high insurance coverage. It is empirically documented that people with high income have lower health risks and are better insured. We show that income differences between risk types lead to a violation of single crossing in the standard insurance model. If insurers have some market power, this can explain the empirically observed outcome. This observation has also policy implications: While risk adjustment is traditionally viewed as an intervention which increases efficiency and raises the utility of low health agents, we show that with a violation of single crossing a trade off between efficiency and solidarity emerges.

Keywords: Health insurance; Risk adjustment; Single crossing (search for similar items in EconPapers)
JEL-codes: D82 I11 (search for similar items in EconPapers)
Date: 2011-08
New Economics Papers: this item is included in nep-hea, nep-ias and nep-upt
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Related works:
Journal Article: Health Insurance Without Single Crossing: Why Healthy People Have High Coverage (2017)
Working Paper: Health Insurance without Single Crossing: Why Healthy People have High Coverage (2011)
Working Paper: Health Insurance without Single Crossing: Why Healthy People have High Coverage (2011)
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