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| Volume 4, No. 1,
April 2005
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Risk Signaling in the Health
Insurance Market |
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Chu-Shiu Li |
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Department of Economics, Feng Chia
University, Taiwan |
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| Abstract |
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This paper analyzes equilibrium health
insurance premium dependencies on signaling costs given individual
health states, risk types, and risk type attributes. Since precise
determination of an individual's premium is costly, insurers can
categorize insureds based on relative screening costs. We show for
two risk types, the equilibrium premium is either community-rated or
risk-rated depending on screening costs. For multiple risk types,
both policies may be concurrently available in equilibrium. |
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Key words:
adverse
selection; separating equilibrium; pooling equilibrium;
signaling costs |
| JEL
classification:
G22; I11 |
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