Private health insurance and the use of health care services - a review of the theoretical literature with application to voluntary private health insurance in universal health care systems

This paper reviews the theoretical literature on the demand for private health insurance and its effect on the use of health care services and applies the theoretical framework to the type of private health insurance that exists alongside a universal health care system. The predominant share of the theoretical literature on private health insurance is developed to model private health insurance in settings where this provides the primary source of coverage and the choice is between purchasing private health insurance and going uninsured. This type of private health insurance is termed principal private health insurance in the following. Private health insurance that co-exists with a universal health care system may be classified as complementary, supplementary or duplicate in relation to the universal health care system based on its coverage. Duplicate insurance covers treatments at private hospitals for treatments that are also available through the universal health care system. Complementary insurance covers private copayment for treatments that are only partly financed by but delivered within the universal health care system, and supplementary insurance covers treatments that are excluded from the universal health care system.