Who Took out Additional Supplementary Health Insurance? A dynamic Analysis of Adverse-Selection (original) (raw)
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Subscribing to Supplemental Health Insurance in France: A Dynamic Analysis of Adverse Selection
2010
Adverse selection, which is well described in the theoretical literature on insurance, remains relatively difficult to study empirically. The traditional approach, which focuses on the binary decision of “covered” or “not”, potentially misses the main effects because heterogeneity may be very high among the insured. In the French context, which is characterized by universal but incomplete public health insurance (PHI), we study the determinants of the decision to subscribe to supplemental health insurance (SHI) in addition to complementary health insurance (CHI). This work permits to analyze health insurance demand at the margin. Using a panelized dataset, we study the effects of both individual state of health, which is measured by age and previous individual health spending, and timing on the decision to subscribe. One striking result is the changing role of health risk over time, illustrating that adverse selection occurs immediately after the introduction of SHI. After the initi...
Health Economics, Policy and Law, 2007
As the share of supplementary health insurance (SI) in health care finance is likely to grow, SI may become an increasingly attractive tool for riskselection in basic health insurance (BI). In this paper, we develop a conceptual framework to assess the probability that insurers will use SI for favourable riskselection in BI. We apply our framework to five countries in which risk-selection via SI is feasible: Belgium, Germany, Israel, the Netherlands, and Switzerland. For each country, we review the available evidence of SI being used as selection device. We find that the probability that SI is and will be used for risk-selection substantially varies across countries. Finally, we discuss several strategies for policy makers to reduce the chance that SI will be used for risk-selection in BI markets.
The influence of supplementary health insurance on switching behaviour: evidence from Swiss data
Health Economics, 2009
This paper focuses on the switching behaviour of sickness fund enrolees in the Swiss health insurance system. Even though the new Federal Law on Social Health Insurance (LAMal) was implemented in 1996 to promote competition among health insurers in basic insurance, there still remains large premium variations within cantons. This indicates that competition has not been able so far to lead to a single price, and reveals some inertia among consumers who seem reluctant to switch to less expensive funds. We investigate one possible barrier to switching behaviour, namely the influence of the supplementary insurance. Our aim is to analyse two decisions (switching decision in basic insurance, subscription to supplementary insurance contracts). We use survey data on health plan choice and import some market data related to the sickness funds (number of enrollees, premiums). The decision to switch and the decision to subscribe to a supplementary contract are estimated both separately and jointly. The results suggest that holding a supplementary insurance contract substantially decreases the propensity to switch. However the impact of supplementary insurance is not significant when the individual assesses his/her health as "very good"; to the contrary, holding a supplementary contract significantly reduces the propensity to switch when the indivual's subjective health status deteriorates. Futhermore, the switching decision is positively influenced by the expected gain of switching. In comparison with the range of the premium difference, the limitations to switch due to the supplementary insurance is moderate, though non negligible. As for the decision to subscribe a supplementary contract, the results show that the income level has a direct positive influence on the propensity to buy a supplementary insurance. Our results suggest that a major mechanism is going on in relation to supplementary insurance: holding a supplementary contract might stop individuals from switching when the individual thinks that she/he could be regarded as a bad risk due to the selection practices that are allowed in supplementary insurance markets. This result bears major policy implications concerning the regulation of basic and supplementary insurance markets.
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.
Complementary health insurance in France Who pays? Why? Who will suffer from public disengagement?
Health Policy, 2007
The study is based on a rare database with information about health status, socioeconomic characteristics and the complementary health insurance choices of the French population. We intend to characterise a two-stage decision process: first, the decision to purchase complementary health insurance, and then the factors related to choice of policy quality. Our econometric study indicates that (i) income level has a strong and significant effect on the decision to purchase complementary insurance, whilst there is no evidence that health risk considerations affect this decision at all; (ii) the individual decision about quality is associated barely if at all with any rational explanatory variables. The population's concrete behaviour, revealed by the study, is consistent with an allocation of low-risk people to private insurance and high-risk people to public insurance. Complementary insurance is not especially relevant to patients with serious diseases, who depend much more on the public system. If the public insurance system were to disengage significantly from coverage of serious illness, a vacuum would be created that would leave people at high risk without full coverage. These results have broad implications for numerous national systems of social protection seeking a new mix between private and public insurance.
Employer-mandated complementary health insurance in France: the likely effects on social welfare
Revue économique, 2018
In France, the Ani reform mandates all private sector employers to offer sponsored Complementary Health Insurance (CHI) to all of their employees beginning on January 1 st , 2016. If this mandate may reduce the cost of CHI coverage for employees, it may also prevent them choosing their optimal level of coverage given their health care needs, their income and their risk preferences. Furthermore, as employees are on average in good health status, the mandate is going to deteriorate the health risk of the pool of insured covered by individual policies, which may increase premiums. Welfare of individuals not affected by the reform (as retired and long term unemployed) may thus decrease. Wages may also potentially decrease by the employer subsidy amount. This research simulates the likely effects of this employer CHI mandate on the social welfare of the population making the most likely scenarios on the increase in individual policies premiums and the decrease in wages. It is based on the 2012 Health, Health Care and Insurance survey linked to the administrative data of the National Health Fund, which provides information on socioeconomic characteristics, CHI, health status, risk preferences and health care expenditures. The first results using an utilitarian social welfare function and an expected utility theory framework show that, if wages do not decrease and if we consider the lowest increase in individual CHI premiums, the Ani reform may induce a very weak increase in social welfare. This positive effect of the reform is mainly driven by the employer subsidy rather by the reduction of financial risk exposure and exists despite the loss of welfare of those who previously chose to be uninsured. However, as soon as we assume a decrease in wages by the employer subsidy, the reform may greatly reduce social welfare. The loss of welfare that may suffer insured on the CHI individual market is therefore hardly offset by the gain in welfare that may benefit private sector employees, while the former are more often vulnerable. There may be a lot of losers while the part of winners is rather small. Those first results will be completed by an additional analysis using an Atkinson social welfare function in order to explore the consequences of various degrees of inequalities aversion in the evaluation of this reform.
Prices Matter: Comparing Two Tests of Adverse Selection in Health Insurance
2012
A standard test for adverse selection in health insurance examines whether people with characteristics predicting high health care utilization are more likely to buy insurance (or buy more generous insurance). George Akerlof's theory of adverse selection suggests a test based on prices: those who purchase insurance at the regular price will have higher expected utilization than those buying insurance when offered a deeply discounted price. Both tests provide (different) lower bounds on self-selection. We use a randomly allocated coupon for deeply discounted health insurance in rural Cambodia coupled with a longitudinal survey to test for adverse selection. While the standard test can show only a small amount of self-selection, the Prices test shows vastly more self-selection-providing a much more informative lower bound.
2007
This paper focuses on the switching behaviour of sickness fund enrolees in the Swiss health insurance system. Even though the new Federal Law on Social Health Insurance (LAMal) was implemented in 1996 to promote competition among health insurers in basic insurance, there still remains large premium variations within cantons. This indicates that competition has not been able so far to lead to a single price, and reveals some inertia among consumers who seem reluctant to switch to less expensive funds. We investigate one possible barrier to switching behaviour, namely the influence of the supplementary insurance. Our aim is to analyse two decisions (switching decision in basic insurance, subscription to supplementary insurance contracts). We use survey data on health plan choice and import some market data related to the sickness funds (number of enrollees, premiums). The decision to switch and the decision to subscribe to a supplementary contract are estimated both separately and joi...