A Game-Theoretical Interpretation of Guaranteed Renewability in Health Insurance
A game-theoretical model is developed here that can explain why the premiums of the health insurance contracts in the individual health insurance market do not vary that much over time, even in absence of any legal restriction on premiums. In this model the insurer and the individuals interact for an infinite number of periods, and the threats of punishments in case of deviations force both the insurer and the individuals to stay on a constant premium path. This model, unlike the other models of guaranteed renewability, does not presume commitment of the insurer.
Document Type: Research Article
Publication date: 2010-09-01