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Subscribing to Supplemental Health Insurance in France: A Dynamic Analysis of Adverse Selection

Carine Franc (), Marc Perronnin () and Aurélie Pierre ()
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Carine Franc: Cermes, Inserm U988, CNRS UMR8211, IRDES
Marc Perronnin: IRDES Institute for research and information in health economics

No DT35, Working Papers from IRDES institut for research and information in health economics

Abstract: 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 initial period, the effects of health risks (such as doctors’ previous health expenditures) diminish over time and financial risks (such as dental and optical expenses and income) remain significant. These results may highlight the inconsistent effects of health risks on the demand for insurance and the challenges of studying adverse selection.

Keywords: Supplemental health insurance; adverse selection; health insurance demand; longitudinal analysis. (search for similar items in EconPapers)
JEL-codes: C23 D82 G22 I11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cta, nep-hea and nep-ias
Date: 2010-12, Revised 2010-12
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