Overall Objectives
Research Program
Application Domains
Highlights of the Year
New Software and Platforms
New Results
Bilateral Contracts and Grants with Industry
Partnerships and Cooperations
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Section: New Results


On the Design of Optimal Health Insurance Contracts under Ex Post Moral Hazard

Participant : Pierre Martinon.

With Pierre Picard and Anasuya Raj (Ecole Polytechnique, Econ. dpt).

We analyze in [20] the design of optimal medical insurance under ex post moral hazard, i.e., when illness severity cannot be observed by insurers and policyholders decide on their health expenditures. We characterize the trade-off between ex ante risk sharing and ex post incentive compatibility, in an optimal revelation mechanism under hidden information and risk aversion.

We establish that the optimal contract provides partial insurance at the margin, with a deductible when insurers rates are affected by a positive loading, and that it may also include an upper limit on coverage. We show that the potential to audit the health state leads to an upper limit on out-of-pocket expenses. Numerical simulations indicate that these qualitative results tend to be robust with respect to the health parameter.