Adverse Selection of Voluntary Health Insurance Scheme Proposed by the Hong Kong Government

Abstract

In response to increasing public heath expenditure, the Government of Hong Kong Special Administrative Region (HKSAR Government) published a consultation document in October 2010 proposing a government-regulated “Voluntary Health Insurance Scheme”. The present study conducts game theoretic analysis and reveals that, under specific information structure, the implementation of such a proposal would result in adverse selection in medical insurance market, resulting in outcomes in opposition to the government’s intention.