Health insurance: Medical treatment vs disability payment
We present arguments for treating health insurance and disability insurance in an integrated manner in economic analysis, based on a model where each individual’s utility depends on both consumption and health and her income depends on her earning ability. When purchasing insurance, she may choose a contract that offers less than full medical treatment. We find that high-ability individuals demand full recovery and equalize utility across states, while low-ability individuals demand partial treatment and cash compensation and suffer a loss in utility if ill. Our results carry over to the case where health states are not observable.
Asheim, G.B., A.W. Emblem og T. Nilssen
Health insurance; Health demand; Disability insurance