Economic Analysis of the Health Insurance System in Chile

Abstract

Chile's private health insurance system has expanded rapidly since its inception in 1981, now covering 28% of the population. The natural evolution of the system has solved some of its original problems. Nevertheless, the following serious difficulties remain: the tendency to raise the costs of health services, the poor coverage of catastrophic illness and the loss of freedom of choice for affiliates as they age or when they acquire a chronic disease. These problems originate in informational asymmetries between affiliates, doctors and insurance companies, the coexistence with a public system having totally different characteristics, and errors in the design of the system. This paper describes a coherent set of proposals that solve the main problems of the system.