Consumer information surplus and adverse selection in competitive health insurance markets: An empirical study

  • van de Ven W
  • van Vliet R
  • 14

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Abstract

If premiums for health insurance are not risk related, there exists a consumer information surplus that may result in adverse selection. Our results indicate that insurers can greatly reduce this surplus by risk-adjusting the premium. We conclude that there need not be any substantial unavoidable consumer information surplus if consumers can choose whether to take a deductible for a one- or two-year health insurance contract with otherwise identical benefits. Therefore, adverse selection need not be a problem in a competitive insurance market with risk-adjusted premiums or vouchers and with such a consumer choice of health plan.

Author-supplied keywords

  • Adverse selection
  • Competitive insurance market
  • Consumer information surplus
  • Health insurance
  • I10
  • I11
  • I18

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Authors

  • Wynand P.M.M. van de Ven

  • RenéC.J.A. van Vliet

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