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Price Elasticity and Adverse Selection in the Demand for Supplementary Health Insurance

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  • Marquis, M Susan
  • Phelps, Charles E
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    Abstract

    Probit regression estimates show the effects of the price of insurance, anticipated medical expenditures, and other factors on reported decisions a bout purchasing hypothetically offered supplementary insurance polici es. The demand estimates can characterize how much supplemental insur ance would be purchased under different tax policies affecting health insurance purchases. Although eliminating the current tax subsidy to insurance is shown to decrease demand, the results indicate a substa ntial demand for supplementary insurance even in absence of present t ax incentives. However, the authors' results on adverse selection rai se concerns about the potential stability of supplemental insurance m arkets. Copyright 1987 by Oxford University Press.

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    Bibliographic Info

    Article provided by Western Economic Association International in its journal Economic Inquiry.

    Volume (Year): 25 (1987)
    Issue (Month): 2 (April)
    Pages: 299-313

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    Handle: RePEc:oup:ecinqu:v:25:y:1987:i:2:p:299-313

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    Cited by:
    1. Carine Franc & Marc Perronnin & Aur´┐Żlie Pierre, 2008. "Private Supplementary Health Insurance: Retirees' Demand," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan, vol. 33(4), pages 610-626, October.
    2. Manning, Willard G. & Marquis, M. Susan, 1996. "Health insurance: The tradeoff between risk pooling and moral hazard," Journal of Health Economics, Elsevier, vol. 15(5), pages 609-639, October.
    3. Jonathan Gruber & James M. Poterba, 1996. "Tax Subsidies to Employer-Provided Health Insurance," NBER Chapters, in: Empirical Foundations of Household Taxation, pages 135-168 National Bureau of Economic Research, Inc.
    4. Hurd, Michael D. & McGarry, Kathleen, 1997. "Medical insurance and the use of health care services by the elderly," Journal of Health Economics, Elsevier, vol. 16(2), pages 129-154, April.
    5. Selden, Thomas M., 1997. "More on the economic efficiency of mixed public/private insurance," Journal of Public Economics, Elsevier, vol. 66(3), pages 517-523, December.
    6. Jonathan Gruber & Michael Lettau, 2000. "How Elastic is the Firm's Demand for Health Insurance?," NBER Working Papers 8021, National Bureau of Economic Research, Inc.
    7. Andreas Million & Regina T. Riphahn & Achim Wambach, 2003. "Incentive effects in the demand for health care: a bivariate panel count data estimation," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(4), pages 387-405.
    8. van de Ven, Wynand P. M. M. & van Vliet, ReneC. J. A., 1995. "Consumer information surplus and adverse selection in competitive health insurance markets: An empirical study," Journal of Health Economics, Elsevier, vol. 14(2), pages 149-169, June.
    9. Jonathan Gruber, 2002. "Taxes and Health Insurance," NBER Chapters, in: Tax Policy and the Economy, Volume 16, pages 37-66 National Bureau of Economic Research, Inc.
    10. Jean Marie Abraham & William B. Vogt & Martin Gaynor, 2002. "Household Demand for Employer-Based Health Insurance," NBER Working Papers 9144, National Bureau of Economic Research, Inc.
    11. Bakker, F. M. & van Vliet, R. C. J. A., 1995. "The introduction of deductibles for prescription drugs in a national health insurance: compulsory or voluntary?," Health Policy, Elsevier, vol. 31(1), pages 53-65, January.
    12. Leopold, Christine & Mantel-Teeuwisse, Aukje Katja & Vogler, Sabine & de Joncheere, Kees & Laing, Richard Ogilvie & Leufkens, Hubert G.M., 2013. "Is Europe still heading to a common price level for on-patent medicines? An exploratory study among 15 Western European countries," Health Policy, Elsevier, vol. 112(3), pages 209-216.
    13. Mark Stabile, 2002. "The Role of Tax Subsidies in the Market for Health Insurance," International Tax and Public Finance, Springer, vol. 9(1), pages 33-50, January.
    14. Matthew Jowett, 2004. "Theoretical insights into the development of health insurance in low-income countries," Working Papers 188chedp, Centre for Health Economics, University of York.

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