Coinsurance vs. co-payments: Reimbursement rules for a monopolistic medical product with competitive health insurers.

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Date: July 2022
Publisher: Elsevier B.V.
Document Type: Report; Brief article
Length: 198 words

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Abstract :

Keywords Ex post moral hazard; Health insurance competition; Copayments; Imperfect competition Abstract This paper studies a market for a medical product in which there is perfect competition among health insurers, while the good is sold by a monopolist. Individuals differ in their severity of illness and there is ex postmoral hazard. We consider two regimes: one in which insurers use coinsurance rates (ad valorem reimbursements) and one in which insurers use co-payments (specific reimbursements). We show that the induced equilibrium with co-payments involves a lower producer price and a higher level of welfare for consumers even though it may imply a larger consumer price. This result provides strong support for a reference price based reimbursement policy. Author Affiliation: (a) Toulouse School of Economics, University of Toulouse Capitole, France (b) Toulouse School of Economics, CNRS, France * Corresponding author. Article History: Received 10 June 2021; Revised 25 February 2022; Accepted 24 May 2022 (footnote)[white star] Financial support from the Chaire " Marché des risques et creation de valeur" of the FdR/SCOR is gratefully acknowledged. We also gratefully acknowledge the funding received by TSE from ANR under grant ANR-17-EURE-0010 (Investissements d'Avenir program). Byline: Helmuth Cremer (a), Jean-Marie Lozachmeur [jean-marie.lozachmeur@tse-fr.eu] (*,b)

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Gale Document Number: GALE|A709525734