Adverse Selection in Low-Income Health Insurance Markets: Evidence from a RCT in Pakistan

Torben Fischer (), Markus Frölich () and Andreas Landmann ()
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Torben Fischer: University of Mannheim
Andreas Landmann: University of Erlangen-Nuremberg

No 11751, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We present robust evidence on the presence of adverse selection in hospitalization insurance for low-income households. A large randomized control trial from Pakistan allows us to separate adverse selection from moral hazard, to estimate how selection changes at different points of the demand curve and to test simple measures against adverse selection. The results reveal substantial selection in individual policies, leading to welfare losses and the threat of a market breakdown. Bundling insurance policies at the household or higher levels almost eliminates adverse selection, thus mitigating its welfare consequences and creating the possibility for sustainable insurance supply.

Keywords: health insurance; adverse selection; Pakistan (search for similar items in EconPapers)
JEL-codes: D82 I13 O12 (search for similar items in EconPapers)
Pages: 55 pages
Date: 2018-08
New Economics Papers: this item is included in nep-dev, nep-exp, nep-hea and nep-ias
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Published - published in: American Economic Journal: Applied Economics, 2023, 15 (3), 313–340

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