A risk adjustment scheme (RAS) within social health insurance is designed to prevent insurers from engaging in risk selection. This paper shows that with cost differences between insurance plans as they exist between managed-care and traditional insurance, current RASs create incentives for...

This paper analyzes the effect of individual health status on the probability of having health insurance and using health services. From the Colombian Living Standard Survey (1997, 2003), we found that the probability of having health insurance if you are self-employed increases either with the...

Asymmetric information can lead to adverse selection and market failure. In a dynamic setting, asymmetric information also limits reclassification risk. This certainty offsets the costs of adverse selection. Using a dynamic model of endogenous insurance choice and price calibrated to the U.S....

Existence of pure strategy equilibria is studied in insurance markets that exhibit both ex ante adverse selection of the Rothschild-Stiglitz-Wilson type, and ex post hidden information moral hazard. It is found that ex post moral hazard has two offsetting effects on the existence of equilibrium,...

This paper describes a classroom game that illustrates the effects of asymmetric information and adverse selection in health insurance markets. The first part of this game simulates a market in which buyers can purchase insurance from sellers; in some periods, government regulation of the...

In a market where insurers are not allowed to risk rate, we find evidence of advantageous selection using observed health expenditure risk. Selection is driven by income and optimism about the future. This may explain insurers’ profitability, despite community rating.

Most of regulators in health care systems use pooling contracts such that payment do not depend on the level of severity. This policy is motivated by concerns about the moral hazard problem. In this paper, we show that it can be optimal when patient severity is private information because of the...

This primer aims to provide IMF macroeconomists with the essential information they need in situations where they must address issues concerning health sector policy and when they have significant macroeconomic implications. Such issues can also affect equity and growth and are fundamental to...

This paper tracks the development of the Irish private health insurance market, both in terms of its legislative background and the development of competition. Literature on adverse selection and risk selection is then reviewed. Data from two surveys of consumers are then analysed to determine...

We study an insurance model characterized by a continuum of risk types, private information and a competitive supply side. We use the model to investigate the welfare effects of discrimination (also known as risk selection). We postulate that a test is available that determines whether an...