Scandinavian Working Papers in Economics

Memorandum,
Oslo University, Department of Economics

No 13/2002: Deductibles in Health Insurances: Pay or Pain?

Geir B. Asheim (), Anne Wenche Emblem and Tore Nilssen ()
Additional contact information
Geir B. Asheim: Dept. of Economics, University of Oslo, Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Anne Wenche Emblem: School of Management, Agder University College, Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Tore Nilssen: Dept. of Economics, University of Oslo, Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway

Abstract: We study a health-insurance market where individuals are o.ered coverage against both medical expenditures and losses in income. Individuals vary in their level of innate ability. If there is private information about the probability of illness and an individual’s innate ability is su.ciently low, we find that competitive insurance contracts yield screening partly in the form of co-payment, i.e., a deductible in pay, and partly in the form of reduced medical treatment, i.e., a deductible in pain.

Keywords: health insurance; adverse selection; deductibles

JEL-codes: D82; I11

17 pages, June 17, 2003

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Published as
Geir B. Asheim, Anne Wenche Emblem and Tore Nilssen, (2003), 'Deductibles in Health Insurances: Pay or Pain?', International Journal of Health Care Finance and Economics, vol 3, pages 253-266

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