Health Insurance Without Single Crossing: Why Healthy People Have High Coverage

TILEC Discussion Paper No. 2011-037

CentER Working Paper Series No. 2011-95

37 Pages Posted: 23 Aug 2011

See all articles by Jan Boone

Jan Boone

Tilburg University - Center for Economic Research (CentER); Centre for Economic Policy Research (CEPR); TILEC

Christoph Schottmüller

University of Cologne; Tilburg Law and Economics Center (TILEC)

Multiple version iconThere are 3 versions of this paper

Date Written: July 7, 2011

Abstract

Standard insurance models predict that people with high (health) risks have high insurance coverage. It is empirically documented that people with high income have lower health risks and are better insured. We show that income differences between risk types lead to a violation of single crossing in the standard insurance model. If insurers have some market power, this can explain the emperically observed outcome. This observation has also policy implications: While risk adjustment is traditionally viewed as an intervention which increases efficiency and raises the utility of low health agents, we show that with a violation of single crossing a trade off between efficiency and solidarity emerges.

Keywords: health insurance, single crossing, risk adjustment

JEL Classification: D82, I11

Suggested Citation

Boone, Jan and Schottmüller, Christoph, Health Insurance Without Single Crossing: Why Healthy People Have High Coverage (July 7, 2011). TILEC Discussion Paper No. 2011-037. Available at SSRN: https://ssrn.com/abstract=1914473 or http://dx.doi.org/10.2139/ssrn.1914473

Jan Boone (Contact Author)

Tilburg University - Center for Economic Research (CentER) ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 2399 (Phone)
+31 13 466 3042 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

TILEC ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands

Christoph Schottmüller

University of Cologne ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

Tilburg Law and Economics Center (TILEC) ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands

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