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The case for risk-based premiums in public health insurance

Published online by Cambridge University Press:  23 March 2006

Peter Zweifel
Affiliation:
Socioeconomic Institute of the University of Zurich, Switzerland
Michael Breuer
Affiliation:
Socioeconomic Institute of the University of Zurich, Switzerland

Abstract

Uniform, risk-independent insurance premiums are accepted as part of ‘managed competition’ in health care. However, they are not compatible with optimality of health insurance contracts in the presence of both ex ante and ex post moral hazard. They have adverse effects on insurer behaviour even if risk adjustment is taken into account. Risk-based premiums combined with means-tested, tax-financed transfers are advocated as an alternative.

Type
Debate
Copyright
Cambridge University Press 2006

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