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Keywords = quasi-arbitrage

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14 pages, 362 KiB  
Article
Optimizing Moral Hazard Management in Health Insurance Through Mathematical Modeling of Quasi-Arbitrage
by Lianlian Zhou, Anshui Li and Jue Lu
Risks 2025, 13(5), 84; https://doi.org/10.3390/risks13050084 - 28 Apr 2025
Viewed by 565
Abstract
Moral hazard in health insurance arises when insured individuals are incentivized to over-utilize healthcare services, especially when they face low out-of-pocket costs. While existing literature primarily addresses moral hazard through qualitative studies, this paper introduces a quantitative approach by developing a mathematical model [...] Read more.
Moral hazard in health insurance arises when insured individuals are incentivized to over-utilize healthcare services, especially when they face low out-of-pocket costs. While existing literature primarily addresses moral hazard through qualitative studies, this paper introduces a quantitative approach by developing a mathematical model based on quasi-arbitrage conditions. The model optimizes health insurance design, focusing on the transition from Low-Deductible Health Plans (LDHPs) to High-Deductible Health Plans (HDHPs), and seeks to mitigate moral hazard by aligning the interests of both insurers and insured. Our analysis demonstrates how setting appropriate deductible levels and offering targeted premium reductions can encourage insured to adopt HDHPs while maintaining insurer profitability. The findings contribute to the theoretical framework of moral hazard mitigation in health insurance and offer actionable insights for policy design. Full article
(This article belongs to the Special Issue Financial Risk, Actuarial Science, and Applications of AI Techniques)
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