Economic modeling of the relationship between insurance, inequality and health

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Date: Oct. 2011
Publisher: Expert Reviews Ltd.
Document Type: Article
Length: 2,394 words
Lexile Measure: 1360L

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Author(s): Asim Farooq 1 , Florian Klohn 1 , Maike Schmitt [[dagger]] 2



asymmetric information; healthcare policy; insurance markets; risk behavior

The 2011 conference was the second time that the organizing committee, Martin Karlsson, Therese Nilsson and Carl Hampus Lyttkens, invited 40 health economists from all around the world to Darmstadt, Germany, to discuss recent research on health and inequality. This year, the focus was on the mechanisms of the health insurance system. The importance of the sector is evident: health insurers have the responsibility to secure access to healthcare in society. The challenge of the meeting was to answer three main questions: how does cost sharing determine the demand and supply side of healthcare? How can unequally distributed information between the actors be identified and evaluated? And, in conclusion, what advice can be given to health policy makers? Impressive new results were presented and lively debates were initiated during and between the sessions.

Invited speakers

During the conference, five distinguished guest economists gave talks in their fields of research.

Louis Eeckhoudt, who pursues research projects at IÉSEG (Lille, France) and the Center for Operations Research and Econometrics (Louvain, Belgium), gave a talk on risk, inequality and stochastic dominance in the framework of either risk or inequality analysis. Using the idea that decision-makers are correlation averse (i.e., they like to 'combine good with bad'â), it was shown that such a preference has implications for the interpretation of the signs of successive derivatives of the utility function beyond the first and second orders. In turn, information about these signs has implications for the analysis and perception of policies that transform income distribution.

Albert Ma, from Boston University (MA, USA), presented his work related to insurance pricing in the context of US healthcare reform. A theoretical model was considered to compare experience rating with community rating. The model results revealed that health plan premiums tend to rise with experience rating. The suggested solution was to use community rating instead of experience rating, which would eliminate this upward spiral effect.

The plenary speaker, Pierre-Yves Geoffard, from the Paris School of Economics (Paris, France), presented microsimulated models to evaluate the performance of the current French health insurance system. The simulated reforms were induced by annual deductibles and a cap on annual out-of-pocket (OOP) payments. The distribution of OOP payments for individuals was used as an indicator for the efficiency (risk-sharing) and equity features of an insurance system. The study revealed that the current insurance system was dominated by the simulated reforms. Moreover, identical deductibles for everybody and a health status-dependent ceiling improved equity. The simulated models have no differences in OOP payment effects if deductibles and ceilings depend on individual income.

In her plenary speech, Sonia Bhalotra from Bristol University (Bristol, UK) summarized her studies of the long-term impacts of early-life health interventions on later life and intergenerational outcomes. Using US data, she found that pneumonia exposure in early childhood scars later life education and earnings and increases disability risk. White Americans and African-Americans both...

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Gale Document Number: GALE|A283867965