Health insurance and preventive behavior

This paper investigates how health insurance parameters influence preventiv e behavior and studies the structure of optimal health insurances. The firs t-best allocation with full coverage for the costs of curative care can gen erally be reached if all prevention is observable by the insurer. If unobse rved prevention is not negligible, consumers will usually purchase only par tial coverage for the costs of curative care, observable prevention may be restricted by the insurer in order to encourage unobserved prevention. If t he advice of physicians can bias the decision of the insured, the insurer u sually recommends a relatively low level of prevention. (JEL: I 11, I 12).