EconPapers    
Economics at your fingertips  
 

Paying for Health Insurance: The Trade-Off between Competition and Adverse Selection

David M. Cutler and Sarah J. Reber

The Quarterly Journal of Economics, 1998, vol. 113, issue 2, 433-466

Abstract: We use data on health plan choices by employees of Harvard University to compare the benefits of insurance competition with the costs of adverse selection. Moving to a voucher-type system induced significant adverse selection, with a welfare loss of 2 to 4 percent of baseline spending. But increased competition reduced Harvard's premiums by 5 to 8 percent. The premium reductions came from insurer profits, so while Harvard was better off, the net effect for society was only the adverse selection loss. Adverse selection can be minimized by adjusting voucher amounts for individual risk. We discuss how such a system would work.

Date: 1998
References: Add references at CitEc
Citations: View citations in EconPapers (273)

Downloads: (external link)
http://hdl.handle.net/10.1162/003355398555649 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:qjecon:v:113:y:1998:i:2:p:433-466.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

The Quarterly Journal of Economics is currently edited by Robert J. Barro, Lawrence F. Katz, Nathan Nunn, Andrei Shleifer and Stefanie Stantcheva

More articles in The Quarterly Journal of Economics from President and Fellows of Harvard College
Bibliographic data for series maintained by Oxford University Press ().

 
Page updated 2025-03-19
Handle: RePEc:oup:qjecon:v:113:y:1998:i:2:p:433-466.