Long-Term Health Insurance: Theory Meets Evidence

Juan Pablo Atal (), Hanming Fang, Martin Karlsson and Nicolas Ziebarth ()
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Juan Pablo Atal: University of Pennsylvania

PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania

Abstract: To insure policyholders against contemporaneous health expenditure shocks and future reclassi-fication risk, long-term health insurance constitutes an alternative to community-rated short-term contracts with an individual mandate. Relying on unique claims panel data from a large private insurer in Germany, we study a real-world long-term health insurance application with a life-cycle perspective. We show that German long-term health insurance (GLTHI) achieves substantial wel-fare gains compared to a series of risk-rated short-term contracts. Although, by its simple design, the premium setting of GLTHI contract departs significantly from the optimal dynamic contract, surprisingly we only find modest welfare differences between the two. Finally, we conduct coun-terfactual policy experiments to illustrate the welfare consequences of integrating GLTHI into a system with a “Medicare-like” public insurance that covers people above 65.

Keywords: Long-Term Health Insurance; Individual Private Health Insurance; Health Care Re-form (search for similar items in EconPapers)
JEL-codes: G22 I11 I18 (search for similar items in EconPapers)
Pages: 75 pages
Date: 2020-03-12
New Economics Papers: this item is included in nep-cta, nep-hea and nep-ias
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Long-term health insurance: Theory meets evidence (2021)
Working Paper: Long-Term Health Insurance: Theory Meets Evidence (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:pen:papers:20-009

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