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Anti‐insurance: Analysing the Health Insurance System in Australia

Joshua Gans () and Stephen King ()

The Economic Record, 2003, vol. 79, issue 247, 473-486

Abstract: This paper develops a model to analyse the Australian health insurance system when individuals differ in their health risk and this risk is private information. In Australia private insurance both duplicates and supplements public insurance. We show that, absent any other interventions, this results in implicit transfers of wealth from those most at risk of adverse health to those least at risk. At the social level, these transfers represent a mean preserving spread of income, creating social risk and lowering welfare – what we call anti‐insurance. The recently introduced rebate on private health insurance can improve welfare by alleviating anti‐insurance.

Date: 2003
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Handle: RePEc:bla:ecorec:v:79:y:2003:i:247:p:473-486