The impact of managed care on the existence of equilibrium in health insurance markets

Michael E. Chernew, Kevin D. Frick

Research output: Contribution to journalArticlepeer-review

Abstract

This study examines the existence of equilibrium in insurance markets when the number of insurance policy attributes is increased (i.e., managed care is introduced). Individuals choose an insurance contract from an endogenous choice set. The introduction of managed care improves the ability of low risks to distinguish themselves from high risks. This may yield equilibrium in cases when it would not exist in an FFS-only environment. However, managed care expands the product space in which a pooling policy could break a separating equilibrium. Thus, existence of equilibrium in an FFS-only environment does not imply existence with managed care. Copyright (C) 1999 Elsevier Science B.V.

Original languageEnglish (US)
Pages (from-to)573-592
Number of pages20
JournalJournal of health economics
Volume18
Issue number5
DOIs
StatePublished - Oct 1999

Keywords

  • Adverse selection
  • Insurance markets

ASJC Scopus subject areas

  • Health Policy
  • Public Health, Environmental and Occupational Health

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