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A Voluntary Deductible in Social Health Insurance with Risk Equalization: “Community‐Rated or Risk‐Rated Premium Rebate?”

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  • Richard C. Van Kleef
  • Wynand P. M. M. Van De Ven
  • René C. J. A. Van Vliet

Abstract

On January 1, 2006 a new mandatory basic health insurance will be introduced in the Netherlands. One aspect of the new scheme is that the insured can choose to have a deductible. This option should increase the individual responsibility and reduce moral hazard. In the new scheme, a risk equalization system is aimed at avoiding preferred risk selection and insolvency of insurance companies with a relatively high‐risk pool. A crucial issue with respect to a voluntary deductible in this type of social health insurance is whether the premium rebate should be community rated or risk rated. The Dutch government has chosen the former, which means that the premium rebate will be independent of health status and risk. Our analysis shows that, in a situation with “accurate” risk equalization, a community‐rated premium rebate could lead to an adverse selection spiral. Over time, this spiral results in none of the insured taking a deductible and thus no reduction in moral hazard.

Suggested Citation

  • Richard C. Van Kleef & Wynand P. M. M. Van De Ven & René C. J. A. Van Vliet, 2006. "A Voluntary Deductible in Social Health Insurance with Risk Equalization: “Community‐Rated or Risk‐Rated Premium Rebate?”," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 73(3), pages 529-550, September.
    • Handle: RePEc:bla:jrinsu:v:73:y:2006:i:3:p:529-550
    DOI: 10.1111/j.1539-6975.2006.00187.x
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    References listed on IDEAS

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    1. Geoffard, Pierre-Yves & Gardiol, Lucien & Grandchamp, Chantal, 2005. "Separating Selection and Incentive Effects in Health Insurance," CEPR Discussion Papers 5380, C.E.P.R. Discussion Papers.
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    1. Stam, Pieter J.A. & van Vliet, René C.J.A. & van de Ven, Wynand P.M.M., 2010. "A limited-sample benchmark approach to assess and improve the performance of risk equalization models," Journal of Health Economics, Elsevier, vol. 29(3), pages 426-437, May.
    2. K. P. M. Winssen & R. C. Kleef & W. P. M. M. Ven, 2016. "Potential determinants of deductible uptake in health insurance: How to increase uptake in The Netherlands?," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 17(9), pages 1059-1072, December.
    3. van Winssen, K.P.M. & van Kleef, R.C. & van de Ven, W.P.M.M., 2015. "How profitable is a voluntary deductible in health insurance for the consumer?," Health Policy, Elsevier, vol. 119(5), pages 688-695.
    4. M. Antonini & R. C. van Kleef & J. Henriquez & F. Paolucci, 2023. "Can risk rating increase the ability of voluntary deductibles to reduce moral hazard?," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 48(1), pages 130-156, January.
    5. K. P. M. Winssen & R. C. Kleef & W. P. M. M. Ven, 2017. "A voluntary deductible in health insurance: the more years you opt for it, the lower your premium?," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 18(2), pages 209-226, March.
    6. K. P. M. Winssen & R. C. Kleef & W. P. M. M. Ven, 2018. "Can premium differentiation counteract adverse selection in the Dutch supplementary health insurance? A simulation study," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 19(5), pages 757-768, June.

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