Risk Selection under Public Health Insurance with Opt-out

Sebastian Panthöfer

UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de Economía

Abstract: This paper studies risk selection between public and private health insurance when some individuals can purchase private insurance by opting out of otherwise mandatory public insurance. Using a theoretical model, I show that public insurance is adversely selected when insurers and insureds are symmetrically informed about health-related risks, and that selection can be of any type (advantageous or adverse) when insureds have private information about health risks. Drawing on data from the German Socio-Economic Panel, I find that: (1) public insurance is adversely selected under the German public health insurance with opt-out scheme, (2) individuals adversely select public insurance based on self-assessed health and advantageously select public insurance based on risk aversion, and (3) there is evidence of asymmetric information.

Keywords: Public; and; private; health; insurance; Risk; selection; Asymmetric; information (search for similar items in EconPapers)
JEL-codes: D82 H51 I13 I18 (search for similar items in EconPapers)
Date: 2015-02-18
New Economics Papers: this item is included in nep-cta, nep-hea, nep-ias and nep-mfd
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Persistent link: https://EconPapers.repec.org/RePEc:cte:werepe:we1504

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