An efficient employer strategy for dealing with adverse selection in multiple-plan offerings: an MSA example.

Academic Article


  • This paper outlines a feasible employee premium contribution policy, which would reduce the inefficiency associated with adverse selection when a limited coverage insurance policy is offered alongside a more generous policy. The "efficient premium contribution" is defined and is shown to lead to an efficient allocation across plans of persons who differ by risk, but it may also redistribute against higher risks. A simulation of the additional option of a catastrophic health plan (CHP) accompanied by a medical savings account (MSA) is presented. The efficiency gains from adding the MSA/catastrophic health insurance plan (CHP) option are positive but small, and the adverse consequences for high risks under an efficient employee premium are also small.
  • Authors

  • Pauly, MV
  • Herring, Bradley
  • Status

    Publication Date

  • July 2000
  • Published In


  • Community Participation
  • Decision Making, Organizational
  • Efficiency, Organizational
  • Fees and Charges
  • Health Benefit Plans, Employee
  • Humans
  • Insurance Selection Bias
  • Insurance, Major Medical
  • Medical Savings Accounts
  • Models, Econometric
  • Risk Adjustment
  • United States
  • Digital Object Identifier (doi)

    Pubmed Id

  • 11010238
  • Start Page

  • 513
  • End Page

  • 528
  • Volume

  • 19
  • Issue

  • 4