@techreport{f95e5efa523c48e29ea1fb139d006a3e,
title = "Community Rating in Health Insurance: Trade-Off Between Coverage and Selection",
abstract = "We analyze the role of community rating in the optimal design of a risk adjustment scheme in competitive health insurance markets when insurers have better information on their customers{\textquoteright} risk profiles than the sponsor of health insurance. The sponsor offers insurers a menu of risk adjustment schemes to elicit this information. The optimal scheme includes a voluntary reinsurance option. Additionally, the scheme should sometimes be complemented by a community rating requirement. The resulting inefficient coverage of low-cost types lowers the sponsor{\textquoteright}s cost of separating different insurer types. This allows the sponsor to redistribute more rents from low-cost to high-cost consumers.",
keywords = "health insurance, cherry picking, risk adjustment, mechanism design",
author = "M. Bijlsma and Jan Boone and G.T.J. Zwart",
year = "2015",
month = nov,
day = "3",
language = "English",
volume = "2015-053",
series = "CentER Discussion Paper",
publisher = "CentER, Center for Economic Research",
type = "WorkingPaper",
institution = "CentER, Center for Economic Research",
}