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Healthy, wealthy and insured? The role of self-assessed health in the demand for private health insurance, CHERE Working Paper 2006/2

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Author Info
Denise Doiron () (University of NSW)
Glenn Jones () (Macquarie University)
Elizabeth Savage () (CHERE, University of Technology, Sydney)

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Abstract

Both adverse selection and moral hazard models predict a positive relationship between risk and insurance; yet the most common finding in empirical studies of insurance is that of a negative correlation. In this paper we investigate the relationship between ex ante risk and private health insurance using data from the 2001 Australian National Health Survey (NHS). The Australian health system provides a setting where the relationship between risk and insurance is more transparent than many other institutional frameworks; private health insurance is not tied to employment; community rating limits the actions of insurers; and private coverage is high for a country providing free public hospital treatment. We find a strong positive association between self-assessed health and private health cover. We use the detailed information available in the NHS to investigate whether we can identify factors responsible for the negative correlation between risk (lower SAHS) and insurance cover. However this relationship persists despite the inclusion of a large set of controls for personal and socio-economic characteristics, risk-related behaviours, objective health measures and an index of mental health. The opposite effect of self-assessed health and long-term conditions on coverage suggests that SAHS is capturing factors such as personality or risk preferences.

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Publisher Info
Paper provided by CHERE, University of Technology, Sydney in its series Working Papers with number 2006/2.

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Date of creation: May 2006
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Handle: RePEc:her:chewps:2006/2

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Related research
Keywords: Private health insurance; self-assessed health; Australia;

Find related papers by JEL classification:
I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. David Card & Carlos Dobkin & Nicole Maestas, 2004. "The Impact of Nearly Universal Insurance Coverage on Health Care Utilization and Health: Evidence from Medicare," Working Papers 197, RAND Corporation Publications Department. [Downloadable!]
    Other versions:
  2. Pierre-Andre Chiappori & Bernard Salanie, 2001. "Testing for Asymmetric Information in Insurance Markets," Journal of Political Economy, University of Chicago Press, vol. 108(1), pages 56-78, February. [Downloadable!] (restricted)
    Other versions:
  3. Amy Finkelstein & Kathleen McGarry, 2003. "Private Information and its Effect on Market Equilibrium: New Evidence from Long-Term Care Insurance," NBER Working Papers 9957, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Lindeboom, Maarten & van Doorslaer, Eddy, 2004. "Cut-point shift and index shift in self-reported health," Journal of Health Economics, Elsevier, vol. 23(6), pages 1083-1099, November. [Downloadable!] (restricted)
    Other versions:
  5. Propper, Carol, 1989. "An Econometric Analysis of the Demand for Private Health Insurance in England and Wales," Applied Economics, Taylor and Francis Journals, vol. 21(6), pages 777-92, June.
  6. John Cawley & Tomas Philipson, 1999. "An Empirical Examination of Information Barriers to Trade in Insurance," American Economic Review, American Economic Association, vol. 89(4), pages 827-846, September. [Downloadable!] (restricted)
    Other versions:
  7. Randall P. Ellis & Elizabeth Savage, 2005. "Where do you run after you run for cover? The impact on premium changes on the characteristics of the privately insured in Australia," Boston University - Department of Economics - Working Papers Series WP2005-020, Boston University - Department of Economics. [Downloadable!]
  8. Crossley, Thomas F. & Kennedy, Steven, 2002. "The reliability of self-assessed health status," Journal of Health Economics, Elsevier, vol. 21(4), pages 643-658, July. [Downloadable!] (restricted)
  9. Ettner, Susan L., 1997. "Adverse selection and the purchase of Medigap insurance by the elderly," Journal of Health Economics, Elsevier, vol. 16(5), pages 543-562, October. [Downloadable!] (restricted)
  10. Rothschild, Michael & Stiglitz, Joseph E, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 630-49, November.
  11. Philip M. Clarke & Chris Ryan, 2006. "Self-reported health: reliability and consequences for health inequality measurement," Health Economics, John Wiley & Sons, Ltd., vol. 15(6), pages 645-652. [Downloadable!]
  12. Amir Shmueli, 2001. "The effect of health on acute care supplemental insurance ownership: an empirical analysis," Health Economics, John Wiley & Sons, Ltd., vol. 10(4), pages 341-350. [Downloadable!]
  13. Pierre-André Chiappori ; Bruno Jullien ; Bernard Salanié ; François Salanié, 2002. "Asymmetric Information in Insurance : General Testable Implications," Working Papers 2002-42, Centre de Recherche en Economie et Statistique. [Downloadable!]
  14. Randall P. Ellis & Thomas G. McGuire, 2006. "Predictability and Predictiveness in Health Care Spending," Boston University - Department of Economics - Working Papers Series WP2006-001, Boston University - Department of Economics. [Downloadable!]
    Other versions:
  15. Gerdtham, U. -G. & Johannesson, M. & Lundberg, L. & Isacson, D., 1999. "A note on validating Wagstaff and van Doorslaer's health measure in the analysis of inequalities in health," Journal of Health Economics, Elsevier, vol. 18(1), pages 117-124, January. [Downloadable!] (restricted)
  16. Cameron, A C & P. K. Trivedi & Frank Milne & J. Piggott, 1988. "A Microeconometric Model of the Demand for Health Care and Health Insurance in Australia," Review of Economic Studies, Blackwell Publishing, vol. 55(1), pages 85-106, January. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Denzil Fiebig & Elizabeth Savage & Rosalie Viney, 2006. "Does the reason for buying health insurance influence behaviour? CHERE Working Paper 2006/1," Working Papers 2006/1, CHERE, University of Technology, Sydney. [Downloadable!]
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This page was last updated on 2009-11-21.

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