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Timing Moral Hazard under Deductibles in Health Insurance

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  • Zabrodina, V.;

Abstract

This paper develops a new approach to identifying timing moral hazard in health insurance contracts when deductible choice is endogenous. I set up a dynamic model of healthcare consumption where individuals exceed a high deductible after a large health shock. I show that individuals either strategically prepone care from the year after the shock and keep a high deductible, or do not retime and switch to a low deductible the year after. The identification of timing moral hazard exploits the randomness of shock timing within a calendar year. Empirical results show quantitatively large timing moral hazard responses, which decrease with the time left to the deductible reset. The insured do re-optimize on-the-go to minimize out-of-pocket costs, but face substantial frictions in retiming, which differ across types of care. These patterns bear implications for cost sharing and insurance policy.

Suggested Citation

  • Zabrodina, V.;, 2022. "Timing Moral Hazard under Deductibles in Health Insurance," Health, Econometrics and Data Group (HEDG) Working Papers 22/23, HEDG, c/o Department of Economics, University of York.
  • Handle: RePEc:yor:hectdg:22/23
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    File URL: https://www.york.ac.uk/media/economics/documents/hedg/workingpapers/2022/2223.pdf
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    Cited by:

    1. Salvi, Irene & Cordier, Johannes & Kuklinski, David & Vogel, Justus & Geissler, Alexander, 2023. "Price sensitivity and demand for healthcare services: Investigating demand-side financial incentives using anonymised claims data from Switzerland," Working Paper Series in Health Economics, Management and Policy 2023-06, University of St.Gallen, School of Medicine, Chair of Health Economics, Policy and Management.

    More about this item

    Keywords

    health insurance; strategic timing; moral hazard; insurance plan choice;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private

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