Optimal cost reimbursement of health insurers to reduce risk selection

Kifmann, Mathias; Lorenz, Normann

Optimal cost reimbursement of health insurers to reduce risk selection

Files

329.pdf(161.79 KB)

Date

2005

Authors

Kifmann, Mathias

Lorenz, Normann

Series

Diskussionsbeiträge ("Grüne Reihe") / FB Wirtschaftswissenschaften; 329

Publication type

Working Paper/Technical Report

Abstract

In the absence of a perfect risk adjustment scheme, reimbursing health insurers' costs can reduce risk selection in community-rated health insurance markets. In this paper, we develop a model in which insurers determine the cost efficiency of health care and have incentives for risk selection. We derive the optimal cost reimbursement function which balances the incentives for cost efficiency and risk selection. For health cost data from a Swiss health insurer, we find that an optimal cost reimbursement scheme should reimburse costs only up to a limit.

Subject (DDC)

330 Economics

Keywords

health insurance,risk selection,risk adjustment

Cite This

ISO 690

KIFMANN, Mathias, Normann LORENZ, 2005. Optimal cost reimbursement of health insurers to reduce risk selection

BibTex

@techreport{Kifmann2005Optim-12233,
  year={2005},
  series={Diskussionsbeiträge ("Grüne Reihe") / FB Wirtschaftswissenschaften},
  title={Optimal cost reimbursement of health insurers to reduce risk selection},
  number={329},
  author={Kifmann, Mathias and Lorenz, Normann}
}

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