Minimum generosity levels in a competitive health insurance market

Minke Remmerswaal, Jan Boone and Rudy Douven

Journal of Health Economics, 2023, vol. 90, issue C

Abstract: An important condition for optimal health insurance is that the level of health care coverage is inversely related to the elasticity of demand. We show that this condition is not satisfied for voluntary deductibles in the Netherlands, which are optional deductibles on top of the mandatory deductible introduced by the Dutch government. We find that low-risk types, that mainly choose voluntary deductibles, have a lower elasticity of demand than high-risk types. Moreover, we show that voluntary deductibles introduce equity problems as it results in non-trivial cross subsidies from high-risk to low-risk types. Capping the level of voluntary deductibles (imposing minimum generosity) is likely to be welfare enhancing in the Netherlands.

Keywords: Deductible; Healthcare expenditure; Moral hazard; Adverse selection; Panel data; Cost-sharing (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jhecon:v:90:y:2023:i:c:s0167629623000590

DOI: 10.1016/j.jhealeco.2023.102782

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