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The Welfare Effects of Long-Term Health Insurance Contracts / Benjamin R. Handel, Igal Hendel, Michael D. Whinston.
- Format:
- Book
- Author/Creator:
- Handel, Benjamin R.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w23624.
- NBER working paper series no. w23624
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2017.
- Summary:
- Reclassification risk is a major concern in health insurance. We use a rich dataset with individual-level information on health risk to empirically study one possible solution: dynamic contracts. Empirically, dynamic contracts with one-sided commitment substantially reduce the reclassification risk present with spot contracting, achieving close to the first-best for consumers with flat net income paths. Gains are smaller for consumers with net income growth, and these consumers prefer ACA-like community rating over dynamic contracts. However, lower risk aversion, sufficient switching costs, or government insurance of pre-age-25 health risks can raise welfare with dynamic contracts above the level in ACA-like markets.
- Notes:
- Print version record
- July 2017.
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