Mv. Pauly et Bj. Herring, An efficient employer strategy for dealing with adverse selection in multiple-plan offerings: an MSA example, J HEALTH EC, 19(4), 2000, pp. 513-528
This paper outlines a feasible employee premium contribution policy, which
would reduce the inefficiency associated with adverse selection when a limi
ted coverage insurance policy is offered alongside a more generous policy.
The "efficient premium contribution" is defined and is shown to lead to an
efficient allocation across plans of persons who differ by risk, but it may
also redistribute against higher risks. A simulation of the additional opt
ion of a catastrophic health plan (CHP) accompanied by a medical savings ac
count (MSA) is presented. The efficiency gains from adding the MSA/catastro
phic health insurance plan (CHP) option are positive but small, and the adv
erse consequences for high risks under an efficient employee premium are al
so small. (C) 2000 Elsevier Science B.V. All rights reserved.