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German Long-Term Health Insurance: Theory Meets Evidence

Author

Listed:
  • Juan Pablo Atal
  • Hanming Fang
  • Martin Karlsson
  • Nicolas R. Ziebarth

Abstract

German long-term health insurance (GLTHI) represents the largest market for private long-term health insurance contracts in the world. We show that GLTHI’s contract design coincides with the optimal dynamic contract for individuals with constant lifetime income profiles. After estimating the key ingredients of a life-cycle model, we find that, under a variety of assumptions, GLTHI achieves welfare that is at most 4% lower than for the optimal contract. Relative to the gains of replacing short-term contracts with either of the two long-term contracts, this welfare gap is smallest when reclassification risk is high.

Suggested Citation

  • Juan Pablo Atal & Hanming Fang & Martin Karlsson & Nicolas R. Ziebarth, 2025. "German Long-Term Health Insurance: Theory Meets Evidence," Journal of Political Economy, University of Chicago Press, vol. 133(6), pages 1840-1885.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/734781
    DOI: 10.1086/734781
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    Cited by:

    1. Martin Gaynor & Kate Ho & Robert J. Town, 2015. "The Industrial Organization of Health-Care Markets," Journal of Economic Literature, American Economic Association, vol. 53(2), pages 235-284, June.
    2. Yaming Cao & Björn Fischer-Weckemann & Johannes Geyer & Nicolas Ziebarth, 2026. "Fundamentally Reforming the DI System: Evidence from Germany," Discussion Papers of DIW Berlin 2157, DIW Berlin, German Institute for Economic Research.
    3. Fischer, Martin & Karlsson, Martin & Prodromidis, Nikolaos, 2021. "The Long-Term Effects of Hospital Deliveries," IZA Discussion Papers 14562, IZA Network @ LISER.

    More about this item

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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