Prior Health Expenditures and Risk Sharing with Insurers Competing on Quality

Posted: 30 Nov 2003

See all articles by Maurice Marchand

Maurice Marchand

Catholic University of Louvain - Department of Economics (Deceased)

Motohiro Sato

Hitotsubashi University - Faculty of Economics

Erik Schokkaert

Catholic University of Leuven (KUL)

Abstract

Insurers can exploit the heterogeneity within risk-adjustment classes to select the good risks because they have more information than the regulator on the expected expenditures of individual insurees. To counteract this cream skimming, mixed systems combining capitation and cost-based payments have been adopted that do not, however, generally use the past expenditures of insurees as a risk adjuster. In this article, two symmetric insurers compete for clients by differentiating the quality of service offered to them according to some private information about their risk. In our setting it is always welfare improving to use prior expenditures as a risk adjuster.

Suggested Citation

Marchand, Maurice and Sato, Motohiro and Schokkaert, Erik, Prior Health Expenditures and Risk Sharing with Insurers Competing on Quality. Available at SSRN: https://ssrn.com/abstract=463784

Maurice Marchand

Catholic University of Louvain - Department of Economics (Deceased)

N/A

Motohiro Sato (Contact Author)

Hitotsubashi University - Faculty of Economics ( email )

Tokyo, 186-8601
Japan

Erik Schokkaert

Catholic University of Leuven (KUL) ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000
Belgium

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
462
PlumX Metrics