Optimal non-linear health insurance

J Health Econ. 1997 Jun;16(3):303-21. doi: 10.1016/s0167-6296(96)00529-2.


Most theoretical and empirical work on efficient health insurance has been based on models with linear insurance schedules (a constant co-insurance parameter). In this paper, dynamic optimization techniques are used to analyse the properties of optimal non-linear insurance schedules in a model similar to one originally considered by Spence and Zeckhauser (American Economic Review, 1971, 61, 380-387) and reminiscent of those that have been used in the literature on optimal income taxation. The results of a preliminary numerical example suggest that the welfare losses from the implicit subsidy to employer-financed health insurance under US tax law may be a good deal smaller than previously estimated using linear models.

MeSH terms

  • Canada
  • Community Participation / economics
  • Community Participation / statistics & numerical data*
  • Costs and Cost Analysis
  • Deductibles and Coinsurance
  • Fees and Charges
  • Health Services Research
  • Health Status
  • Insurance Selection Bias
  • Insurance, Health / economics*
  • Models, Economic*
  • Risk