Healt insuranse: treatment vs. Compensation

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Emblem, A.W, G. Asheim and T. Nilssen




Andre skrifter
Arbeidsnotat nr 5 Høgskolen i Agder

Sammendrag (engelsk)

In this paper we study how differences in ability can explain individuals’ choice between health insurance contracts offering indemnity in the form of medical treatment and /or cash compensation of income loss. Ability is a measure of the individuals’ human capital and depends on their state of health. Individuals with a high ability are shown to purchase more extensive insurance coverage than individuals with a low ability. Furthermore, high-ability individuals prefer an insurance contract entitling them to complete medical treatment if they fall ill, while low-ability individuals prefer a contract offering indemnity partly as medical treatment and partly as cash compensation. We show that in an unregulated competitive insurance market low-ability individuals will insure only partially, thus suffering a lower level of utility if ill, while high-ability individuals will insure fully.

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Oppdragsgiver: Norges forskningsråd
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Frisch prosjekt: 4101 - Økonomi og helse