Health Economics

Household Bundling to Reduce Adverse Selection: Application to Social Health Insurance

Anh Nguyen

This paper explores the use of bundling to reduce adverse selection in insurance mar-kets and its application to social health insurance programs. When the choice to buy health insurance is made at the household level, bundling the insurance policies of household mem-bers eliminates the effect of adverse selection within a household since the household can no longer select only sick members to enroll. However, this can exacerbate adverse selection across households, as healthier households might choose to drop out of the insurance market.