OPTIMAL HEALTH INSURANCE WITH CONSTRAINTS UNDER UTILITY OF HEALTH, WEALTH AND INCOME

We consider an optimal health insurance design problem with con-straints under utility of health, wealth and income. The preference framework we establish herein describes the trade-off among health, wealth and income explicitly, which is beneficial to distinguish health insurance design from other nonlife insurance designs. Moreover, the work takes into account the case that if the insured is severely or critically ill, the insured may not fully recover even after necessary medical treatment. By taking these special features into account, the health insurance design problem is formulated as a constrained optimization problem, and the optimal solutions are derived by using the La-grange multiplier method and optimal control technique. Finally, two numer-ical examples are given to illustrate our results. Our research work gives new insights into health insurance design.