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Advantageous Selection in the Private Hospital Insurance Market in Europe: Evidence on the Role of Education and Cognitive Ability

Ciro Avitabile

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

Abstract: I use microdata from the Survey of Health, Ageing and Retirement in Europe to study whether the cost of acquiring health information is an important determinant of the decision to buy private hospital health insurance for individuals aged 50+, in eight European countries. I first test whether, conditional on health insurance companies' risk assessments, individuals have residual private information on insurance determinants other than their risk type. My results show that there are individual characteristics, not observed by the insurers, that are positively correlated with hospital insurance coverage and negatively correlated with the ex post probability of requiring hospital treatment. However, this opposite association is significantly different from zero only in countries with low quality healthcare systems. I then provide evidence that education and cognitive ability act as substitutes for quality of health promotion in determining the propensity to take out a voluntary private hospital insurance.

Keywords: Health Insurance; Cognitive Ability; Healthcare Quality (search for similar items in EconPapers)
JEL-codes: D82 G22 I11 (search for similar items in EconPapers)
Date: 2009-04-01, Revised 2010-02-09
New Economics Papers: this item is included in nep-age, nep-eec, nep-hea and nep-ias
Note: A former version of this paper was circulated under the title “The Health Insurance Puzzle in Europe: The Role of Information”
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