Scandinavian Working Papers in Economics

HERO On line Working Paper Series,
Oslo University, Health Economics Research Programme

No 2002:13: Deductibles in Health Insurance: Pay or Pain?

Geir B. Asheim (), Tore Nilssen () and Anne Wenche Emblem ()
Additional contact information
Geir B. Asheim: Department of Economics, Postal: University of Oslo, P.O. Box 1095 Blindern, NO-0317 Oslo, Norway
Tore Nilssen: Department of Economics, Postal: University of Oslo, P.O. Box 1095 Blindern, NO-0317 Oslo, Norway
Anne Wenche Emblem: School of Management, Postal: Agder University College, Norway

Abstract: We study a health-insurance market where individuals are offered 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 sufficiently 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 29, 2009

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