Advanced Search
MyIDEAS: Login to save this paper or follow this series

Selection on Moral Hazard in Health Insurance

Contents:

Author Info

  • Liran Einav
  • Amy Finkelstein
  • Stephen P. Ryan
  • Paul Schrimpf
  • Mark R. Cullen

Abstract

In this paper we explore the possibility that individuals may select insurance coverage in part based on their anticipated behavioral response to the insurance contract. Such "selection on moral hazard" can have important implications for attempts to combat either selection or moral hazard. We explore these issues using individual-level panel data from a single firm, which contain information about health insurance options, choices, and subsequent claims. To identify the behavioral response to health insurance coverage and the heterogeneity in it, we take advantage of a change in the health insurance options offered to some, but not all of the firm's employees. We begin with descriptive evidence that is suggestive of both heterogeneous moral hazard as well as selection on it, with individuals who select more coverage also appearing to exhibit greater behavioral response to that coverage. To formalize this analysis and explore its implications, we develop and estimate a model of plan choice and medical utilization. The results from the modeling exercise echo the descriptive evidence, and allow for further explorations of the interaction between selection and moral hazard. For example, one implication of our estimates is that abstracting from selection on moral hazard could lead one to substantially over-estimate the spending reduction associated with introducing a high deductible health insurance option.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.nber.org/papers/w16969.pdf
Download Restriction: no

Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16969.

as in new window
Length:
Date of creation: Apr 2011
Date of revision:
Publication status: published as Liran Einav & Amy Finkelstein & Stephen P. Ryan & Paul Schrimpf & Mark R. Cullen, 2013. "Selection on Moral Hazard in Health Insurance," American Economic Review, American Economic Association, vol. 103(1), pages 178-219, February.
Handle: RePEc:nbr:nberwo:16969

Note: AG HC HE IO LS PE
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

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.:
as in new window
  1. James J. Heckman & Sergio Urzua & Edward Vytlacil, 2006. "Understanding Instrumental Variables in Models with Essential Heterogeneity," The Review of Economics and Statistics, MIT Press, vol. 88(3), pages 389-432, August.
  2. Hanming Fang & Michael P. Keane & Dan Silverman, 2008. "Sources of Advantageous Selection: Evidence from the Medigap Insurance Market," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 116(2), pages 303-350, 04.
  3. Liran Einav & Amy Finkelstein & Jonathan Levin, 2010. "Beyond Testing: Empirical Models of Insurance Markets," Annual Review of Economics, Annual Reviews, Annual Reviews, vol. 2(1), pages 311-336, 09.
  4. Eugenio J. Miravete, 2003. "Choosing the Wrong Calling Plan? Ignorance and Learning," American Economic Review, American Economic Association, American Economic Association, vol. 93(1), pages 297-310, March.
  5. Alma Cohen & Liran Einav, 2005. "Estimating Risk Preferences from Deductible Choice," NBER Working Papers 11461, National Bureau of Economic Research, Inc.
  6. Liran Einav & Amy Finkelstein & Iuliana Pascu & Mark R. Cullen, 2010. "How general are risk preferences? Choices under uncertainty in different domains," NBER Working Papers 15686, National Bureau of Economic Research, Inc.
  7. Keeler, Emmett B. & Rolph, John E., 1988. "The demand for episodes of treatment in the health insurance experiment," Journal of Health Economics, Elsevier, Elsevier, vol. 7(4), pages 337-367, December.
  8. Manning, Willard G, et al, 1987. "Health Insurance and the Demand for Medical Care: Evidence from a Randomized Experiment," American Economic Review, American Economic Association, American Economic Association, vol. 77(3), pages 251-77, June.
  9. M. Keane & R. Mofitt, 1995. "A Structural Model of Multiple Welfare Program Participation and Labor Supply," Working Papers, Brown University, Department of Economics 95-4, Brown University, Department of Economics.
  10. Pedro Carneiro & James J. Heckman & Edward J. Vytlacil, 2010. "Estimating Marginal Returns to Education," NBER Working Papers 16474, National Bureau of Economic Research, Inc.
  11. A. Colin Cameron & Jonah B. Gelbach & Douglas L. Miller, 2006. "Robust Inference with Multi-way Clustering," NBER Technical Working Papers, National Bureau of Economic Research, Inc 0327, National Bureau of Economic Research, Inc.
  12. M. Kate Bundorf & Jonathan D. Levin & Neale Mahoney, 2008. "Pricing and Welfare in Health Plan Choice," NBER Working Papers 14153, National Bureau of Economic Research, Inc.
  13. Chandra, Amitabh & Gruber, Jonathan & McKnight, Robin, 2009. "Patient Cost-Sharing and Hospitalization Offsets in the Elderly," Scholarly Articles, Harvard Kennedy School of Government 8058412, Harvard Kennedy School of Government.
  14. Patrick Bajari & Han Hong & Ahmed Khwaja, 2006. "Moral Hazard, Adverse Selection and Health Expenditures: A Semiparametric Analysis," NBER Working Papers 12445, National Bureau of Economic Research, Inc.
  15. Amanda E. Kowalski, 2009. "Censored Quantile Instrumental Variable Estimates of the Price Elasticity of Expenditure on Medical Care," NBER Working Papers 15085, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Raj Chetty & Amy Finkelstein, 2012. "Social Insurance: Connecting Theory to Data," NBER Working Papers 18433, National Bureau of Economic Research, Inc.
  2. Gharad Bryan & Dean Karlan & Jonathan Zinman, 2012. "You Can Pick Your Friends, But You Need to Watch Them: Loan Screening and Enforcement in a Referrals Field Experiment," Working Papers, Economic Growth Center, Yale University 1009, Economic Growth Center, Yale University.
  3. Deryugina, Tatyana, 2012. "Does Selection in Insurance Markets Always Favor Buyers?," MPRA Paper 53583, University Library of Munich, Germany.
  4. Tobias J. Klein & Christian Lambertz & Konrad O. Stahl, 2013. "Market Transparency, Adverse Selection, and Moral Hazard," CESifo Working Paper Series 4552, CESifo Group Munich.
  5. Powell-Jackson, Timothy & Hanson, Kara & Whitty, Christopher J.M. & Ansah, Evelyn K., 2014. "Who benefits from free healthcare? Evidence from a randomized experiment in Ghana," Journal of Development Economics, Elsevier, Elsevier, vol. 107(C), pages 305-319.
  6. Klein, Tobias & Lambertz, Christian & Stahl, Konrad O, 2013. "Adverse Selection and Moral Hazard in Anonymous Markets," CEPR Discussion Papers, C.E.P.R. Discussion Papers 9501, C.E.P.R. Discussion Papers.
  7. Valentino Dardanoni & Paolo Li Donni, 2012. "Incentive and Selection Effects of Medigap Insurance on Inpatient Care," EIEF Working Papers Series 1203, Einaudi Institute for Economics and Finance (EIEF), revised Feb 2012.
  8. Aviva Aron-Dine & Liran Einav & Amy Finkelstein & Mark R. Cullen, 2012. "Moral Hazard in Health Insurance: How Important Is Forward Looking Behavior?," NBER Working Papers 17802, National Bureau of Economic Research, Inc.
  9. Bernal, Noelia & Carpio, Miguel A. & Klein, Tobias J., 2014. "The Effects of Access to Health Insurance for Informally Employed Individuals in Peru," IZA Discussion Papers 8213, Institute for the Study of Labor (IZA).
  10. Martin Gaynor & Kate Ho & Robert Town, 2014. "The Industrial Organization of Health Care Markets," NBER Working Papers 19800, National Bureau of Economic Research, Inc.
  11. Randall P. Ellis & Denzil G. Fiebig & Meliyanni Johar & Glenn Jones & Elizabeth Savage, 2013. "Explaining Health Care Expenditure Variation: Large‐Sample Evidence Using Linked Survey And Health Administrative Data," Health Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 22(9), pages 1093-1110, 09.
  12. Arun Chandrasekhar & Victor Chernozhukov & Francesca Molinari & Paul Schrimpf, 2012. "Inference for best linear approximations to set identified functions," CeMMAP working papers, Centre for Microdata Methods and Practice, Institute for Fiscal Studies CWP43/12, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  13. Georges Dionne, 2012. "The Empirical Measure of Information Problems with Emphasis on Insurance Fraud and Dynamic Data," Cahiers de recherche, CIRPEE 1233, CIRPEE.
  14. Aviva Aron-Dine & Liran Einav & Amy Finkelstein & Mark Cullen, 2012. "Moral hazard in health insurance: How important is forward looking behavior?," Discussion Papers, Stanford Institute for Economic Policy Research 11-007, Stanford Institute for Economic Policy Research.
  15. Georges Dionne & Casey G. Rothschild, 2014. "Economic Effects of Risk Classification Bans," Cahiers de recherche, CIRPEE 1420, CIRPEE.
  16. Moreno-Serra, R & Smith, PC, 2013. "Towards an index of health coverage," Working Papers, Imperial College, London, Imperial College Business School 10422, Imperial College, London, Imperial College Business School.
  17. Benjamin R. Handel, 2011. "Adverse Selection and Switching Costs in Health Insurance Markets: When Nudging Hurts," NBER Working Papers 17459, National Bureau of Economic Research, Inc.

Lists

This item is featured on the following reading lists or Wikipedia pages:
  1. Selection on Moral Hazard in Health Insurance (AER 2013) in ReplicationWiki

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:16969. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.