The Impact and Incidence of Supplemental Health Insurance: Evidence from Sweden

This paper studies the role of private supplemental health insurance (SHI) in universal healthcare systems. Linking novel microdata on SHI contracts to rich administrative data from Sweden, we document a steep income gradient in take-up: higher-income individuals are substantially more likely to enroll in SHI despite a greater healthcare need among lower-income individuals. Exploiting variation in the timing of employer-sponsored SHI, we find large and persistent increases in healthcare utilization (23 percent). The effects are even larger for low-income individuals and extend beyond specialist consultations to high-value treatments, consistent with binding rationing in public care. Focusing on cancer as a high-stakes condition, we find that SHI increases screening and diagnoses and reduces mortality. Although SHI is privately contracted, its effects materialize largely within the public healthcare system: coverage increases publicly financed utilization and reduces waiting times, generating negative fiscal and congestion externalities.