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Optimal health insurance

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  • Charles E. Phelps

Abstract

I formulate expected‐utility‐maximizing models for health insurance with a single optimal coinsurance (C*) and (separately) a single optimal deductible (D*). While so‐doing, I formalize Nyman's challenge to standard welfare‐loss models, clarifying when and by how much this alters unadjusted models. Using MEPS‐calibrated lognormal distributions and incorporating skewness and kurtosis measures of financial risk, I show how C* shifts as various economic parameters change. For reasonable parameter values, C*

Suggested Citation

  • Charles E. Phelps, 2023. "Optimal health insurance," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 90(1), pages 213-241, March.
    • Handle: RePEc:bla:jrinsu:v:90:y:2023:i:1:p:213-241
    DOI: 10.1111/jori.12377
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    References listed on IDEAS

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    Cited by:

    1. Justin Sydnor, 2023. "Special issue on health insurer decision‐making," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 90(1), pages 5-8, March.

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