A Simple Model of Health Insurance Competition


Address for correspondence: TU Dresden, Department of Business and Economics, TU Dresden and CESifo, D-01062 Dresden, Germany. Tel.: +49 351 46337548. Fax: +49 351 46337130. e-mail: alexander.kemnitz@tu-dresden.de


This study investigates competition between health insurance companies under different financing regulations. We consider two alternatives advanced in recent German healthcare reform discussions: competition by contribution rates (health contributions) and by fees (health premia). We find that contribution rate competition yields lower company profits and higher consumer welfare than premia competition when switching between insurance companies is costly.