Em. Van Barneveld et al., Risk sharing as a supplement to imperfect capitation: a tradeoff between selection and efficiency, J HEALTH EC, 20(2), 2001, pp. 147-168
This paper describes forms of risk sharing between insurers and the regulat
or in a competitive individual health insurance market with imperfectly ris
k-adjusted capitation payments. Risk sharing implies a reduction of an insu
rer's incentives for selection as well as for efficiency. In a theoretical
analysis, we show how the optimal extent of risk sharing may depend on the
weights the regulator assigns to these effects. Some countries employ outli
er or proportional risk sharing as a supplement to demographic capitation p
ayments. Our empirical results strongly suggest that other forms of risk sh
aring yield better tradeoffs between selection and efficiency. (C) 2001 Els
evier Science B.V. All rights reserved.