Optimal Ex Post Risk Adjustment in Markets with Adverse Selection *

Anastasios Dosis (1)

1 ESSEC Business School

This paper studies general health insurance markets. It proposes an ex post risk adjustment scheme that discourages risk selection and promotes efficient competition. Under the proposed risk adjustment scheme, the regulator engages in transfers that are conditional on the ex post profits of insurers. The risk adjustment scheme is entirely budget balanced, as it does not call for government subsidies, and requires the regulator to hold minimal information to implement it. Equilibrium is shown to exist and be efficient in any environment with a finite number of types and states even if single-crossing is not satisfied.

Mots clés: Health insurance; Risk selection; Risk adjustment; Efficiency

Domaines: Gestion et management

Anastasios Dosis. Optimal Ex Post Risk Adjustment in Markets with Adverse Selection *. 2019. ⟨hal-02130442⟩