The Incidence of Adverse Selection: Theory and Evidence from Health Insurance Choices / Michael Geruso, Timothy Layton, Adam Leive.

Format:

Book

Author/Creator:

Geruso, Michael.

Contributor:

National Bureau of Economic Research.

Layton, Timothy.

Leive, Adam.

Series:

Working Paper Series (National Bureau of Economic Research) no. w31435.

NBER working paper series no. w31435

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2023.

Summary:

Existing research on selection in insurance markets focuses on how adverse selection distorts prices and misallocates products across people. This ignores the distributional consequences of who pays the higher prices. In this paper, we show that the distributional incidence depends on the correlations between income, expected costs, and insurance demand. We discuss the general implications for the design of subsidies and mandates when policymakers value both equity and efficiency. Then, in an empirical case study of a large employer, we show that the incidence of selection falls on higher-income employees, who are more likely to choose generous health insurance plans.

Notes:

Print version record

July 2023.