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Premium Risk and Managed Care

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Abstract

This paper analyzes how individuals can insure premium risk and obtain high quality health insurance in a managed care environment. Insurers choose health care providers. Only a fraction of high risk individuals is unambiguously identifiable in front of a court. Premium insurance is not able to reach a first-best risk allocation while health insurers have an incentive to stint on quality under guaranteed renewable contracts. It is shown that a contract exists which can implement the first-best. This contract specifies payments to individuals and a third party upon switching to create a credible self-commitment by the insurer to provide high quality.

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Authors and Affiliations

  1. Universität Konstanz, Fach D 136, 78457, Konstanz, Germany

    Mathias Kifmann

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  1. Mathias Kifmann
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Kifmann, M. Premium Risk and Managed Care. Journal of Risk and Uncertainty 22, 277–293 (2001). https://doi.org/10.1023/A:1011187102745

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  • DOI: https://doi.org/10.1023/A:1011187102745

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