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Risk Selection under Public Health Insurance with Opt‐Out

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  • Sebastian Panthöfer

Abstract

This paper studies risk selection between public and private health insurance when some, but not all, individuals can opt out of otherwise mandatory public insurance. Using a theoretical model, I show that public insurance is adversely selected when insurers and insureds are symmetrically informed about health‐related risks, and that there can be adverse or advantageous selection when insureds are privately informed. Using data from the German Socio‐Economic Panel, I find that (i) public insurance is, on balance, adversely selected under the German public health insurance with opt out scheme, (ii) individuals advantageously select public insurance based on risk aversion and residential location, and (iii) there is suggestive evidence of asymmetric information in the market for private health insurance. Copyright © 2016 John Wiley & Sons, Ltd.

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  • Sebastian Panthöfer, 2016. "Risk Selection under Public Health Insurance with Opt‐Out," Health Economics, John Wiley & Sons, Ltd., vol. 25(9), pages 1163-1181, September.
  • Handle: RePEc:wly:hlthec:v:25:y:2016:i:9:p:1163-1181
    DOI: 10.1002/hec.3351
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    Cited by:

    1. Pilny, Adam & Wübker, Ansgar & Ziebarth, Nicolas R., 2017. "Introducing risk adjustment and free health plan choice in employer-based health insurance: Evidence from Germany," Journal of Health Economics, Elsevier, vol. 56(C), pages 330-351.
    2. De La Mata, Dolores & Machado, Matilde P. & Olivella, Pau & Valdés, Maria Nieves, 2022. "Asymmetric Information with multiple risks: the case of the Chilean Private Health Insurance Market," UC3M Working papers. Economics 35441, Universidad Carlos III de Madrid. Departamento de Economía.

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    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private

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