Health Insurance without Single Crossing: Why Healthy People Have High Coverage

TY - JOUR

T1 - Health Insurance without Single Crossing

T2 - Why Healthy People Have High Coverage

AU - Boone, Jan

AU - Schottmüller, Christoph

PY - 2017/2/1

Y1 - 2017/2/1

N2 - Standard insurance models predict that people with high risks have high insurance coverage. It is empirically documented that people with high income have lower health risks and are better insured. We show that income differences between risk types lead to a violation of single crossing in an insurance model where people choose treatment intensity. We analyse different market structures and show the following: If insurers have market power, the violation of single crossing caused by income differences and endogenous treatment choice can explain the empirically observed outcome. Our results do not rely on differences in risk aversion between types.

AB - Standard insurance models predict that people with high risks have high insurance coverage. It is empirically documented that people with high income have lower health risks and are better insured. We show that income differences between risk types lead to a violation of single crossing in an insurance model where people choose treatment intensity. We analyse different market structures and show the following: If insurers have market power, the violation of single crossing caused by income differences and endogenous treatment choice can explain the empirically observed outcome. Our results do not rely on differences in risk aversion between types.

KW - Faculty of Social Sciences

KW - health insurance

KW - competition

KW - single crossing

U2 - 10.1111/ecoj.12242

DO - 10.1111/ecoj.12242

M3 - Journal article

SN - 0013-0133

VL - 127

SP - 84

EP - 105

JO - The Economic Journal

JF - The Economic Journal

IS - 599

ER -