Risk selection under public health insurance with opt-out

Panthöfer, S.

Health, Econometrics and Data Group (HEDG) Working Papers from HEDG, c/o Department of Economics, University of York

Abstract: This paper examines risk selection in a parallel public and private health insurance system in which some, but not all, individuals can purchase substitutive 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 there can be any type of selection (advantageous or adverse) when insureds are privately informed. Using the German Socio-Economic Panel, I present evidence on the selection between public and private health insurance in Germany, which is one of the countries with such a health insurance system. I find that: (1) public insurance is adversely selected, (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 suggesting the presence of asymmetric information between private insurers and their clients.

Keywords: public and private health insurance; risk selection; asymmetric information (search for similar items in EconPapers)
JEL-codes: D82 H51 I13 (search for similar items in EconPapers)
Date: 2015-09
New Economics Papers: this item is included in nep-hea and nep-ias
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https://www.york.ac.uk/media/economics/documents/hedg/workingpapers/1515.pdf Main text (application/pdf)

Related works:
Journal Article: Risk Selection under Public Health Insurance with Opt‐Out (2016)
Working Paper: Risk Selection under Public Health Insurance with Opt-out (2015)
Working Paper: Risk Selection under Public Health Insurance with Opt-out (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:yor:hectdg:15/15

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