This study examines incentives for voluntary disclosure of quality information by health maintenance organizations (HMOs). Economic theory predicts complete voluntary disclosure without mandatory rules. This article introduces plans' selection motives to avoid high-risk consumers as a deterrent of full unraveling; if disclosure is expected to attract high-risk members, plans have incentives to withhold information. The empirical analysis shows that while market unraveling was an important mechanism to bring disclosure, it was not complete, and plans in markets with high-risk consumers were less likely to disclose. This study suggests that market unraveling may not arise if risk selection incentives are prevalent.
All Science Journal Classification (ASJC) codes
- Economics and Econometrics