A Note on Health Insurance under Ex Post Moral Hazard

Pierre Picard

Risks, 2016, vol. 4, issue 4, 1-9

Abstract: In the linear coinsurance problem, examined first by Mossin (1968), a higher absolute risk aversion with respect to wealth in the sense of Arrow–Pratt implies a higher optimal coinsurance rate. We show that this property does not hold for health insurance under ex post moral hazard; i.e., when illness severity cannot be observed by insurers, and policyholders decide on their health expenditures. The optimal coinsurance rate trades off a risk-sharing effect and an incentive effect, both related to risk aversion.

Keywords: health insurance; ex post moral hazard; coinsurance (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Working Paper: A note on health insurance under ex post moral hazard (2016)
Working Paper: A note on health insurance under ex post moral hazard (2016)
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