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Optimal ex post risk adjustment in markets with adverse selection
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Optimal ex post risk adjustment in markets with adverse selection

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  • Dosis, Anastasios

Abstract

This paper studies general health insurance markets and proposes a scheme of transfers among a regulator and insurers that discourages risk selection and promotes efficient competition. The proposed scheme conditions transfers on the ex post profits of insurers and requires the regulator to hold minimal information to implement it. Equilibrium exists and each equilibrium allocation is efficient in any environment with a finite number of types and states even if single-crossing is not satisfied. I argue that the proposed scheme features the characteristics of ex post risk adjustment.

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  • Dosis, Anastasios, 2019. "Optimal ex post risk adjustment in markets with adverse selection," Journal of Mathematical Economics, Elsevier, vol. 85(C), pages 52-59.
    • Handle: RePEc:eee:mateco:v:85:y:2019:i:c:p:52-59
    DOI: 10.1016/j.jmateco.2019.09.003
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    1. Yuya Wakabayashi, 2024. "An implementation of constrained efficient allocations in hidden information economies," OSIPP Discussion Paper 24E002, Osaka School of International Public Policy, Osaka University.
    2. Dosis, Anastasios, 2022. "Price caps and efficiency in markets with adverse selection," Journal of Mathematical Economics, Elsevier, vol. 99(C).

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    More about this item

    Keywords

    Health insurance; Risk selection; Risk adjustment; Efficiency;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • I10 - Health, Education, and Welfare - - Health - - - General
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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