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on Insurance Economics |
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Issue of 2005‒07‒25
one paper chosen by Soumitra K Mallick Indian Institute of Social Welfare and Bussiness Management |
| By: | Ramón Castaño; Andrés Zambrano |
| Abstract: | Reducing the impact of insurance market failures with regulations such as community-rated premiums, standardized benefit packages and open enrolment, yield limited impact because they create room for selection bias. The Colombian social health insurance system started a market approach in 1993 on the expectation to improve performance of preexisting monopolistic insurance funds by exposing them to competition by new entrants. It is hypothesized that market failures would lead to biased selection favoring new entrants. Two household surveys are analyzed using Self-reported health status and the presence of chronic conditions as indicators of prospective risk of enrolees. Biased selection is found to take place, leading to adverse selection among incumbents, and favorable selection among new entrants. This pattern is observed in 1997 and worsens in 2003. Although the two incumbents analyzed are public organizations, and their size dropped substantially between these two years, fiscal implications in terms of government bailouts are analyzed. |
| Keywords: | Social Health Insurance |
| JEL: | I11 |
| Date: | 2005–05–01 |
| URL: | http://d.repec.org/n?u=RePEc:col:000116:001115&r=ias |