Title: Arrow's theorem of the deductible: moral hazard and stop-loss in health insurance
Authors: Drèze, J.H. ×
Schokkaert, Erik #
Issue Date: 2013
Publisher: Kluwer Academic Publishers
Series Title: Journal of Risk and Uncertainty vol:47 issue:2 pages:147-163
Abstract: The logic of Arrow’s theorem of the deductible, i.e. that it is optimal to focus insurance coverage on the states with largest expenditures, remains at work in a model with ex post moral hazard. The optimal insurance contract takes the form of a system of “implicit deductibles”, resulting in the same indemnities as a contract with full insurance above a variable deductible positively related to the elasticity of medical expenditures with respect to the insurance rate. In a model with a predefined ceiling on expenses, there is no reimbursement for expenses below the stop-loss amount. One motivation to have some insurance below the deductible arises if regular health care expenditures in a situation of standard health have a negative effect on the probability of getting into a state with large medical expenses.
ISSN: 0895-5646
Publication status: published
KU Leuven publication type: IT
Appears in Collections:Research Center of Public Economics, Leuven
× corresponding author
# (joint) last author

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