Adverse Selection in Health Insurance¶
Cutler, D. M., & Zeckhauser, R. J. Adverse Selection in Health Insurance.
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Mechanisms¶
- Stratified Entry Rule
- Its strength is that it stops the adverse-selection spiral before it starts, keeping low-risk members in the pool and the average risk stable — the difference between a heterogeneous pool that survives and one that hollows out into its worst risks.
This sourceFrontiers in Health Policy Research. 1: 1–32. (1998). Cutler and Zeckhauser explain how risk differentiation can interrupt the adverse-selection feedback that drives healthier members out and destabilizes an insurance pool.
- Its strength is that it stops the adverse-selection spiral before it starts, keeping low-risk members in the pool and the average risk stable — the difference between a heterogeneous pool that survives and one that hollows out into its worst risks.
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