IDEAS home Printed from https://ideas.repec.org/a/eee/jomega/v107y2022ics0305048321001638.html
   My bibliography  Save this article

Mechanism design of multi-strategy health insurance plans under asymmetric information

Author

Listed:
  • Sun, Huan
  • Wang, Haiyan
  • Steffensen, Sonja

Abstract

In health insurance services, the health system is often unable to obtain people’s private genetic information. This knowledge can reflect individuals’ future health, which leads to their information advantage. People with information advantages can hide their true private information and obtain insurance, which leads to service inefficiency for insurance providers. To reduce this inefficiency, we design a mechanism for the health system to build a set of multi-strategy combination insurance plans for heterogeneous probabilistic individuals, where the prices and the price difference of plans guide their choice and prevention strategy. First, after analysing the utility of the individuals and the health system when the individuals use true/false information, we propose a reasonable goal of this mechanism: When the people use true information to make decisions, the individuals and the health system can obtain maximum utility. Second, we provide the conditions for the individuals and the health system to participate in health insurance, and the conditions for achieving the rationality goal of the mechanism. Finally, we obtain the optimal result for the individuals and the health system. On one hand, some new theories on mechanism design are produced in health insurance transactions. On the other hand, the insurance scheme design effectively eliminates the individual’s motive for concealing information and improves the efficiency of health services.

Suggested Citation

  • Sun, Huan & Wang, Haiyan & Steffensen, Sonja, 2022. "Mechanism design of multi-strategy health insurance plans under asymmetric information," Omega, Elsevier, vol. 107(C).
    • Handle: RePEc:eee:jomega:v:107:y:2022:i:c:s0305048321001638
    DOI: 10.1016/j.omega.2021.102554
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0305048321001638
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.omega.2021.102554?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Mehmet Ulvi Saygi Ayvaci & Oguzhan Alagoz & Mehmet Eren Ahsen & Elizabeth S. Burnside, 2018. "Preference‐Sensitive Management of Post‐Mammography Decisions in Breast Cancer Diagnosis," Production and Operations Management, Production and Operations Management Society, vol. 27(12), pages 2313-2338, December.
    2. Zhou, Wenhui & Wan, Qiang & Zhang, Ren-Qian, 2017. "Choosing among hospitals in the subsidized health insurance system of China: A sequential game approach," European Journal of Operational Research, Elsevier, vol. 257(2), pages 568-585.
    3. Zweifel, Peter, 2020. "Innovation in long-term care insurance: Joint contracts for mitigating relational moral hazard," Insurance: Mathematics and Economics, Elsevier, vol. 93(C), pages 116-124.
    4. Lu (Lucy) Yan & Xiangbin Yan & Yong Tan & Sherry X. Sun, 2019. "Shared Minds: How Patients Use Collaborative Information Sharing via Social Media Platforms," Production and Operations Management, Production and Operations Management Society, vol. 28(1), pages 9-26, January.
    5. Margret Bjarnadottir & David Anderson & Leila Zia & Kim Rhoads, 2018. "Predicting Colorectal Cancer Mortality: Models to Facilitate Patient‐Physician Conversations and Inform Operational Decision Making," Production and Operations Management, Production and Operations Management Society, vol. 27(12), pages 2162-2183, December.
    6. Sarah Zheng & Anita L. Tucker & Z. Justin Ren & Janelle Heineke & Amy McLaughlin & Aubrey L. Podell, 2018. "The Impact of Internal Service Quality on Preventable Adverse Events in Hospitals," Production and Operations Management, Production and Operations Management Society, vol. 27(12), pages 2201-2212, December.
    7. Vera-Hernandez, Marcos, 2003. "Structural Estimation of a Principal-Agent Model: Moral Hazard in Medical Insurance," RAND Journal of Economics, The RAND Corporation, vol. 34(4), pages 670-693, Winter.
    8. Manaf Zargoush & Mehmet Gümüş & Vedat Verter & Stella S. Daskalopoulou, 2018. "Designing Risk‐Adjusted Therapy for Patients with Hypertension," Production and Operations Management, Production and Operations Management Society, vol. 27(12), pages 2291-2312, December.
    9. Pierre Martinon & Pierre Picard & Anasuya Raj, 2018. "On the design of optimal health insurance contracts under ex post moral hazard," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 43(2), pages 137-185, September.
    10. Ching‐To Albert Ma & Michael H. Riordan, 2002. "Health Insurance, Moral Hazard, and Managed Care," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 11(1), pages 81-107, March.
    11. Lauren F. Laker & Craig M. Froehle & Jaime B. Windeler & Christopher John Lindsell, 2018. "Quality and Efficiency of the Clinical Decision‐Making Process: Information Overload and Emphasis Framing," Production and Operations Management, Production and Operations Management Society, vol. 27(12), pages 2213-2225, December.
    12. Ma, Peng & Shang, Jennifer & Wang, Haiyan, 2017. "Enhancing corporate social responsibility: Contract design under information asymmetry," Omega, Elsevier, vol. 67(C), pages 19-30.
    13. Dhaval Dave & Robert Kaestner, 2009. "Health insurance and ex ante moral hazard: evidence from Medicare," International Journal of Health Economics and Management, Springer, vol. 9(4), pages 367-390, December.
    14. Georges Dionne (ed.), 2013. "Handbook of Insurance," Springer Books, Springer, edition 2, number 978-1-4614-0155-1, June.
    15. Kurt M. Bretthauer & Sergei Savin, 2018. "Introduction to the Special Issue on Patient‐Centric Healthcare Management in the Age of Analytics," Production and Operations Management, Production and Operations Management Society, vol. 27(12), pages 2101-2102, December.
    16. Tan, Ken Seng & Wei, Pengyu & Wei, Wei & Zhuang, Sheng Chao, 2020. "Optimal dynamic reinsurance policies under a generalized Denneberg’s absolute deviation principle," European Journal of Operational Research, Elsevier, vol. 282(1), pages 345-362.
    17. Teymourifar, Aydin & Kaya, Onur & Ozturk, Gurkan, 2021. "Contracting models for pricing and capacity decisions in healthcare systems," Omega, Elsevier, vol. 100(C).
    18. Xiang Liu & Michael Hu & Jonathan E. Helm & Mariel S. Lavieri & Ted A. Skolarus, 2018. "Missed Opportunities in Preventing Hospital Readmissions: Redesigning Post‐Discharge Checkup Policies," Production and Operations Management, Production and Operations Management Society, vol. 27(12), pages 2226-2250, December.
    19. Nitin Mehta & Jian Ni & Kannan Srinivasan & Baohong Sun, 2017. "A Dynamic Model of Health Insurance Choices and Healthcare Consumption Decisions," Marketing Science, INFORMS, vol. 36(3), pages 338-360, May.
    20. Wang, Jian-Jun & Li, Zhong-Ping & Shi, Jim (Junmin) & Chang, Ai-Chih (Jasmine), 2021. "Hospital referral and capacity strategies in the two-tier healthcare systems," Omega, Elsevier, vol. 100(C).
    21. Corina Birghila & Tim J. Boonen & Mario Ghossoub, 2020. "Optimal Insurance under Maxmin Expected Utility," Papers 2010.07383, arXiv.org.
    22. Eric M. Webb & Alex F. Mills, 2019. "Incentive–Compatible Prehospital Triage in Emergency Medical Services," Production and Operations Management, Production and Operations Management Society, vol. 28(9), pages 2221-2241, September.
    23. Ghossoub, Mario, 2019. "Budget-constrained optimal insurance with belief heterogeneity," Insurance: Mathematics and Economics, Elsevier, vol. 89(C), pages 79-91.
    24. Schumacher, Heiner, 2016. "Insurance, self-control, and contract flexibility," European Economic Review, Elsevier, vol. 83(C), pages 220-232.
    25. Ghossoub, Mario, 2019. "Budget-constrained optimal insurance without the nonnegativity constraint on indemnities," Insurance: Mathematics and Economics, Elsevier, vol. 84(C), pages 22-39.
    26. Salar Ghamat & Gregory S. Zaric & Hubert Pun, 2018. "Contracts to Promote Optimal Use of Optional Diagnostic Tests in Cancer Treatment," Production and Operations Management, Production and Operations Management Society, vol. 27(12), pages 2184-2200, December.
    27. Yichun Chi & Wei Wei, 2020. "Optimal insurance with background risk: An analysis of general dependence structures," Finance and Stochastics, Springer, vol. 24(4), pages 903-937, October.
    28. Bayerstadler, Andreas & van Dijk, Linda & Winter, Fabian, 2016. "Bayesian multinomial latent variable modeling for fraud and abuse detection in health insurance," Insurance: Mathematics and Economics, Elsevier, vol. 71(C), pages 244-252.
    29. Charles E. Phelps, 1978. "Illness Prevention and Medical Insurance," NBER Chapters, in: The Economics of Physician and Patient Behavior, pages 183-207, National Bureau of Economic Research, Inc.
    30. Caballini, Claudia & Paolucci, Massimo, 2020. "A rostering approach to minimize health risks for workers: An application to a container terminal in the Italian port of Genoa," Omega, Elsevier, vol. 95(C).
    31. Zhang, Yu & Wang, Yu & Tang, Jiafu & Lim, Andrew, 2020. "Mitigating overtime risk in tactical surgical scheduling," Omega, Elsevier, vol. 93(C).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Xu, Su Xiu & Guo, Ren-Yong & Zhai, Yue & Feng, Jianghong & Ning, Yu, 2024. "Toward a positive compensation policy for rail transport via mechanism design: The case of China Railway Express," Transport Policy, Elsevier, vol. 146(C), pages 322-342.
    2. Li, Zhong-Ping & Chang, Aichih (Jasmine) & Zou, Zongbao, 2023. "Design mechanism to coordinate a hierarchical healthcare system: Patient subsidy vs. capacity investment," Omega, Elsevier, vol. 118(C).
    3. Chunhua Tang & Huiyuan Zhang & Jiamuyan Xie, 2022. "Optimal Contract Design in Contract Farming under Asymmetric Effort Information," Sustainability, MDPI, vol. 14(22), pages 1-17, November.
    4. Yuan, Yichao & Xiao, Tiaojun, 2023. "Revelation mechanism and decoy strategy for a supply chain with consumer's perceived substitutability," Omega, Elsevier, vol. 120(C).
    5. Sun, Huan & Wang, Haiyan, 2024. "Data-driven incentive mechanism design for chronic disease prevention from the perspective of government," European Journal of Operational Research, Elsevier, vol. 313(2), pages 652-668.
    6. Wang, Ziwei & Chen, Hongmin & Luo, Jun & Wang, Chunming & Xu, Xinyi & Zhou, Ying, 2024. "Sharing service in healthcare systems: A recent survey," Omega, Elsevier, vol. 129(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Zhou, Cuihua & Lan, Yanfei & Li, Weifeng & Zhao, Ruiqing, 2022. "Medicare policies in a two-Tier healthcare system with overtreatment," Omega, Elsevier, vol. 109(C).
    2. Corina Birghila & Tim J. Boonen & Mario Ghossoub, 2023. "Optimal insurance under maxmin expected utility," Finance and Stochastics, Springer, vol. 27(2), pages 467-501, April.
    3. Chi, Yichun & Zhuang, Sheng Chao, 2020. "Optimal insurance with belief heterogeneity and incentive compatibility," Insurance: Mathematics and Economics, Elsevier, vol. 92(C), pages 104-114.
    4. Li, Zhong-Ping & Chang, Aichih (Jasmine) & Zou, Zongbao, 2023. "Design mechanism to coordinate a hierarchical healthcare system: Patient subsidy vs. capacity investment," Omega, Elsevier, vol. 118(C).
    5. Corina Birghila & Tim J. Boonen & Mario Ghossoub, 2020. "Optimal Insurance under Maxmin Expected Utility," Papers 2010.07383, arXiv.org.
    6. Wei Zhao & Qianqian Ben Liu & Xitong Guo & Tianshi Wu & Subodha Kumar, 2022. "Quid pro quo in online medical consultation? Investigating the effects of small monetary gifts from patients," Production and Operations Management, Production and Operations Management Society, vol. 31(4), pages 1698-1718, April.
    7. Niu, Baozhuang & Xu, Haotao & Dai, Zhipeng, 2022. "Check Only Once? Health Information Exchange between Competing Private Hospitals," Omega, Elsevier, vol. 107(C).
    8. Ghossoub, Mario & Jiang, Wenjun & Ren, Jiandong, 2022. "Pareto-optimal reinsurance under individual risk constraints," Insurance: Mathematics and Economics, Elsevier, vol. 107(C), pages 307-325.
    9. Sebastian Soika, 2018. "Moral Hazard and Advantageous Selection in Private Disability Insurance," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 43(1), pages 97-125, January.
    10. Wang, Fan & Xu, Danni & Zhuo, Xiaopo & Zhang, Chao & Liu, Yaoqi, 2022. "Improving consumer welfare in vaccine market: Pricing, government subsidies and consumer awareness," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 167(C).
    11. Brandon Pope & Abhijit Deshmukh & Andrew Johnson & James Rohack, 2014. "Multilateral Contracting And Prevention," Health Economics, John Wiley & Sons, Ltd., vol. 23(4), pages 397-409, April.
    12. Asimit, Alexandru V. & Boonen, Tim J. & Chi, Yichun & Chong, Wing Fung, 2021. "Risk sharing with multiple indemnity environments," European Journal of Operational Research, Elsevier, vol. 295(2), pages 587-603.
    13. Ni Huang & Zhijun Yan & Haonan Yin, 2021. "Effects of Online–Offline Service Integration on e‐Healthcare Providers: A Quasi‐Natural Experiment," Production and Operations Management, Production and Operations Management Society, vol. 30(8), pages 2359-2378, August.
    14. Jianmei Zhao & Hai Zhong, 2015. "Medical expenditure in urban China: a quantile regression analysis," International Journal of Health Economics and Management, Springer, vol. 15(4), pages 387-406, December.
    15. Grant Miller & Diana Pinto & Marcos Vera-Hernández, 2013. "Risk Protection, Service Use, and Health Outcomes under Colombia's Health Insurance Program for the Poor," American Economic Journal: Applied Economics, American Economic Association, vol. 5(4), pages 61-91, October.
    16. Boonen, Tim J. & Jiang, Wenjun, 2022. "A marginal indemnity function approach to optimal reinsurance under the Vajda condition," European Journal of Operational Research, Elsevier, vol. 303(2), pages 928-944.
    17. Fainman, Emily Zhu & Kucukyazici, Beste, 2020. "Design of financial incentives and payment schemes in healthcare systems: A review," Socio-Economic Planning Sciences, Elsevier, vol. 72(C).
    18. Renaud Bourlès, 2017. "Prevention incentives in long‐term insurance contracts," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 26(3), pages 661-674, September.
    19. Wang, Jian-Jun & Zhang, Xinmou & Shi, Jim Junmin, 2023. "Hospital dual-channel adoption decisions with telemedicine referral and misdiagnosis," Omega, Elsevier, vol. 119(C).
    20. Diwas Singh KC & Stefan Scholtes & Christian Terwiesch, 2020. "Empirical Research in Healthcare Operations: Past Research, Present Understanding, and Future Opportunities," Manufacturing & Service Operations Management, INFORMS, vol. 22(1), pages 73-83, January.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jomega:v:107:y:2022:i:c:s0305048321001638. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/375/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.