Designing an Optimal Sickness Insurance. Some Evidence from the Swedish Experience (original) (raw)
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Moral hazard and sickness insurance: Empirical evidence from a sickness insurance reform in Sweden
Papers published in the Working Paper Series should, according to the IFAU policy, have been discussed at seminars held at IFAU and at least one other academic forum, and have been read by one external and one internal referee. They need not, however, have undergone the standard scrutiny for publication in a scientific journal. The purpose of the Working Paper Series is to provide a factual basis for public policy and the public policy discussion.
Incomplete risk adjustment and adverse selection in the German public health insurance system
2002
The German statutory health insurance market was exposed to competition in 1996. To avoid adverse selection, a prospective risk compensation scheme was introduced in 1994. Due to their low contribution rates, company-based sickness funds were able to attract a lot of new members. We analyze -using data from the German Socio-Economic Panel -the determinants of these transitions from 1995 to 2000. By estimating a simultaneous two equation system, we find that health status positively, and significantly, affects the probability of changing to a company-based sickness fund, especially after controlling for age. Thus the risk compensation scheme does not fully control for the health status of the changers. Consequently, the comparative advantages of company-based funds will increase over time. This observation provides evidence for the standard Rothschild-Stiglitz separating equilibrium.
Adverse selection and moral hazard in health insurance
In this paper, we want to characterize the optimal health insurance contract with adverse selection and moral hazard. We assume that policyholders di¤er by the permanent health status loss and choose an unobservable preventive e¤ort in order to reduce the probability of illness which is ex-ante identical. The di¤erence in illness'after-e¤ect modi…es policyholders' preventive actions. By the way, they di¤er in probabilities of illness leading to a situation close to Rothschild and Stiglitz 'model. In this case, we show that the optimal contract exhibits a deductible for the high health risk type since a higher after e¤ect implies a higher preventive e¤ort and then a lower probability of illness rather than for the low health risk type.
The excess burden of public insurance. Some results from Swedish data
International Review of Law and Economics, 1984
Since the early 1970s there has been discussion in the law and economics literature concerning the economic impact of different compensation schemes for losses due to accidents and illness.' One reason for the discussion has been the trend in many western countries towards tax-financed insurance plans. Some welfare-oriented countries have gone far in this direction. In Sweden practically all income losses and medical treatment for illness and accidents are covered by general tax revenues, mainly through a payroll tax with equal rates for all firms.2 Supporters of the Swedish insurance plans argue that uniform, complete and speedy compensation for victims is most easily administered when financed from general tax revenues. Tort liability-in combination with private liability insurance-is costly to administer and tends to involve considerable time before victims are compensated. Having a firm liable for losses due to illness and accidents should make it less willing to employ elderly persons, women or other categories of persons with greater expectancy of being absent from. work. The most common argument against publii financed compensation schemes is the 'moral hazard' one, namely that complete insurance reduces the involved parties' incentive to prevent accidents and illness. Public compensation schemes such as those in Sweden have properties similar to insurance schemes financed by uniform premiums. Relatively risky or 'unhealthy' industries pay the same payroll tax (or premium) as relatively 'healthy' ones, and employees pay health care taxes (premiums) that are independent of the claims expected in the industry. When premiums are independent of whether risks are high or low, some of the costs of 'unhealthy' production will in effect be paid by 'healthy' industries. Goods produced by 'unhealthy' industries will also be sold at relatively low prices compared with products of 'healthy' industries. In equilibrium the share of products produced by 'healthy' industries will thus be inefficiently small. Differential premiums related to the expected costs of accidents and illness in the industry in question may reduce such inefficiency. Note that the distortion due to non-differential premiums is not the same as moral hazard. Moral hazard is due to the lack of incentives to reduce the riskiness of production, while the distortion caused by uniform premiums is a result of
Health Economics, 2003
In many countries, social health insurance systems are being reformed in favor of more competition among insurers, while premiums are community rated by regulation. The implicit incentives for insurers to engage in risk selection can only be curtailed using appropriate systems of risk-adjusted equalization payments among insurers. To develop these systems, predictors of individual utilization patterns have to be identified, e.g. via regression analysis using previous utilization data. In some countries such as Germany, such data are hardly ever available. In the early nineties, a number of sickness funds participated in an experiment in which individual utilization data were collected. Our data set covers more than 70 000 members of company sickness funds over a 5-year period. We analyze sociodemographic determinants of utilization which could be used as risk adjusters in a risk equalization scheme. Our results suggest that besides age and sex, the set of risk adjusters should include income, family status and a dummy for the last year of life.
Risk adjustment and risk selection on the sickness fund insurance market in five European countries
Health Policy, 2003
From the mid-1990s citizens in Belgium, Germany, Israel, the Netherlands and Switzerland have a guaranteed periodic choice among risk-bearing sickness funds, who are responsible for purchasing their care or providing them with medical care. The rationale of this arrangement is to stimulate the sickness funds to improve efficiency in health care production and to respond to consumers' preferences. To achieve solidarity, all five countries have implemented a system of risk-adjusted premium subsidies (or risk equalization across risk groups), along with strict regulation of the consumers' direct premium contribution to their sickness fund. In this article we present a conceptual framework for understanding risk adjustment and comparing the systems in the five countries. We conclude that in the case of imperfect risk adjustment */as is the case in all five countries in the year 2001 */the sickness funds have financial incentives for risk selection, which may threaten solidarity, efficiency, quality of care and consumer satisfaction. We expect that without substantial improvements in the risk adjustment formulae, risk selection will increase in all five countries. The issue is particularly serious in Germany and Switzerland. We strongly recommend therefore that policy makers in the five countries give top priority to the improvement of the system of risk adjustment. That would enhance solidarity, cost-control, efficiency and client satisfaction in a system of competing, risk-bearing sickness funds. # (W.P.M.M. van de Ven). Health Policy 65 (2003) 75 Á/98 www.elsevier.com/locate/healthpol 0168-8510/02/$ -see front matter # 2002 Elsevier Science Ireland Ltd. All rights reserved. PII: S 0 1 6 8 -8 5 1 0 ( 0 2 ) 0 0 1 1 8 -5
Optimal health insurance: the case of observable, severe illness
Journal of Health Economics, 2000
We explore optimal cost-sharing provisions for insurance contracts when individuals have observable, severe diseases with a discrete number of medically appropriate treatment options. Variation in preferences for alternative treatments is unobserved by the insurer and non-contractible. Interest in such situations is increasingly common, exemplified by disease Ž . carve-out programs and shared decision-making SDM tools. We demonstrate that optimal insurance charges a copay to patients choosing the high-cost treatment and provides consumers of the low-cost treatment a cash payment. A simulation of the effect of such a policy, based on prostate cancer, indicates a substantial reduction in moral hazard. q 2000 Elsevier Science B.V. All rights reserved. JEL classification: I11; D81
Regional Variance in Sickness Insurance Usage
2009
Which factors best explain the regional variation in sick-listing and early retirement? Data from the Swedish Social Insurance Agency is fitted against variables describing different regional characteristics that have been linked to sickness insurance consumption in the literature. Results, in line with earlier empirical investigation, suggest that particularly the employment rate, the populations" age, and its wealth are strong determinants of regional insurance usage. Two further factors, though less discussed in the literature, appear to have some relevance as well: A high share of large workplaces is found to predict higher rates of early retirement, while a large share of foreign-born predict lower sick-listing rates. Both effects have been found before, though the first one perhaps not in Swedish cross section analysis and the latter does not appear to be well understood in the literature. A tentative explanation for it is given here. Employees absent from work with sickness reported as the reason for this. (Measured by polls).
Changes in Sickness Insurance and Incapacity for Work of Employees in the Moravian-Silesian Region
Procedia Economics and Finance, 2015
Sickness insurance is a part of social security and its task is to insure people participating in this system by the insurance benefits at law intended social events in order to reduce or completely eliminate the effects of these events. Reform steps in the sphere of sickness insurance and sickness benefits, especially the fact that during the temporary incapacity for work the benefits were provided only from the 22nd day, influenced the decisions of employees about their incapacity for work significantly. The aim of this paper is to give an idea of sickness insurance, especially the impact of legal regulation changes in the system of this insurance on employees, who represent the largest share of social insured persons focusing on the Moravian-Silesian Region. The impact of changes in sickness insurance will be presented by selected indicators of temporary incapacity for work using regression analysis to estimate the development of individual indicators in the following years based on knowledge of the development of indicators in the years 2000-2013.
Selection on Moral Hazard in Health Insurance
2011
numerous seminar participants for helpful comments and suggestions. The data were provided as part of an ongoing service and research agreement between Alcoa, Inc. and Stanford, under which Stanford faculty, in collaboration with faculty and staff at Yale University, perform jointly agreed-upon ongoing and ad hoc research projects on workers' health, injury, disability, and health care, and Mark Cullen serves as Senior Medical Advisor for Alcoa, Inc.