Existing research on selection in insurance markets focuses on how adverse selection distorts prices and misallocates products across people. This ignores the distributional consequences of who pays the higher prices. In this paper, we show that the distributional incidence depends on the...

Health insurance is increasingly provided through managed competition, in which subsidies for consumers and risk adjustment for insurers are key market design instruments. We illustrate that subsidies offer two advantages over risk adjustment in markets with adverse selection. They provide...