Risk selection and heterogeneous preferences in health insurance markets with a public option.

@article{Polyakova2016RiskSA,
  title={Risk selection and heterogeneous preferences in health insurance markets with a public option.},
  author={Maria A. Polyakova},
  journal={Journal of health economics},
  year={2016},
  volume={49},
  pages={
          153-68
        }
}
Conventional wisdom suggests that if private health insurance plans compete alongside a public option, they may endanger the latter's financial stability by cream-skimming good risks. This paper argues that two factors may contribute to the extent of cream-skimming: (i) degree of horizontal differentiation between public and private options when preferences are heterogeneous; (ii) whether contract design encourages choice of private insurance before information about risk is revealed. I explore… CONTINUE READING
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