Community rating and choice between traditional health insurance and managed care

Mathias Kifmann ()

Health Economics, 1999, vol. 8, issue 7, 563-578

Abstract: This paper analyses the consequences of allowing a choice between traditional insurance and managed care under community rating. A model of a competitive health insurance market is developed; with the risk equalization scheme being imperfect. There are two types of individuals who are characterized by different costs with respect to traditional insurance. Compared with a situation where traditional insurance is compulsory, allowing choice can make both types better off, can increase the utility of low‐cost types at the expense of high‐cost types, as well as having no effect. Inefficiencies under compulsory traditional insurance can be eliminated and new inefficiencies can be created. Market equilibria are not necessarily second best. Copyright © 1999 John Wiley & Sons, Ltd.

Date: 1999
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https://doi.org/10.1002/(SICI)1099-1050(199911)8:73.0.CO;2-A

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Persistent link: https://EconPapers.repec.org/RePEc:wly:hlthec:v:8:y:1999:i:7:p:563-578

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