Community rating and choice between traditional health insurance and managed care

✍ Scribed by Mathias Kifmann

• Publisher: John Wiley and Sons
• Year: 1999
• Tongue: English
• Weight: 150 KB
• Volume: 8
• Category: Article
• ISSN: 1057-9230
• DOI: 10.1002/(sici)1099-1050(199911)8:7<563::aid-hec477>3.0.co;2-a

✦ Synopsis

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.