Pareto-improving Risk selection in Social Health Insurance

1
Peter Zweifel
Peter Zweifel
2
Michael Breuer
Michael Breuer
1 U. of Zurich (Switzerland)

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Social health insurance traditionally imposes mandatory membership in a single pool in the aim of improving the welfare of high risks. However, this creates two problems, inefficiency of a monopolistic scheme and insufficient adaptation to individual preferences. Competition combined with a risk adjustment scheme can be used to improve efficiency. In the presence of preference heterogeneity, risk selection may improve adaptation to individual preferences, resulting in Pareto improvement over the pooling contract. This is shown to be possible both under perfect and imperfect risk adjustment.

Funding

No external funding was declared for this work.

Conflict of Interest

The authors declare no conflict of interest.

Ethical Approval

No ethics committee approval was required for this article type.

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Not applicable for this article.

Peter Zweifel. 2015. \u201cPareto-improving Risk selection in Social Health Insurance\u201d. Global Journal of Management and Business Research - B: Economic & Commerce GJMBR-B Volume 15 (GJMBR Volume 15 Issue B6): .

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GJMBR Volume 15 Issue B6
Pg. 19- 29
Journal Specifications

Crossref Journal DOI 10.17406/GJMBR

Print ISSN 0975-5853

e-ISSN 2249-4588

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GJMBR-B Classification: D 82, I 38, L51
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v1.2

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September 4, 2015

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English

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Social health insurance traditionally imposes mandatory membership in a single pool in the aim of improving the welfare of high risks. However, this creates two problems, inefficiency of a monopolistic scheme and insufficient adaptation to individual preferences. Competition combined with a risk adjustment scheme can be used to improve efficiency. In the presence of preference heterogeneity, risk selection may improve adaptation to individual preferences, resulting in Pareto improvement over the pooling contract. This is shown to be possible both under perfect and imperfect risk adjustment.

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Pareto-improving Risk selection in Social Health Insurance

Peter Zweifel
Peter Zweifel U. of Zurich (Switzerland)
Michael Breuer
Michael Breuer

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