Optimal health insurance

Charles E. Phelps

Journal of Risk & Insurance, 2023, vol. 90, issue 1, 213-241

Abstract: I formulate expected‐utility‐maximizing models for health insurance with a single optimal coinsurance (C*) and (separately) a single optimal deductible (D*). While so‐doing, I formalize Nyman's challenge to standard welfare‐loss models, clarifying when and by how much this alters unadjusted models. Using MEPS‐calibrated lognormal distributions and incorporating skewness and kurtosis measures of financial risk, I show how C* shifts as various economic parameters change. For reasonable parameter values, C*

Date: 2023
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