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Subscribing to Supplemental Health Insurance in France: A Dynamic Analysis of Adverse Selection

  • Carine Franc

    ()

    (Cermes, Inserm U988, CNRS UMR8211, IRDES)

  • Marc Perronnin

    ()

    (IRDES institut for research and information in health economics)

  • Aurélie Pierre

    ()

    (IRDES institut for research and information in health economics)

Adverse selection, which is well described in the theoretical literature on insurance, remains relatively difficult to study empirically. The traditional approach, which focuses on the binary decision of “covered” or “not”, potentially misses the main effects because heterogeneity may be very high among the insured. In the French context, which is characterized by universal but incomplete public health insurance (PHI), we study the determinants of the decision to subscribe to supplemental health insurance (SHI) in addition to complementary health insurance (CHI). This work permits to analyze health insurance demand at the margin. Using a panelized dataset, we study the effects of both individual state of health, which is measured by age and previous individual health spending, and timing on the decision to subscribe. One striking result is the changing role of health risk over time, illustrating that adverse selection occurs immediately after the introduction of SHI. After the initial period, the effects of health risks (such as doctors’ previous health expenditures) diminish over time and financial risks (such as dental and optical expenses and income) remain significant. These results may highlight the inconsistent effects of health risks on the demand for insurance and the challenges of studying adverse selection.

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File URL: http://www.irdes.fr/EspaceAnglais/Publications/WorkingPapers/DT35SubscribingSupplementalHealthInsurance.pdf
File Function: First version, 2010
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Paper provided by IRDES institut for research and information in health economics in its series Working Papers with number DT35.

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Length: 21 pages
Date of creation: Dec 2010
Date of revision: Dec 2010
Handle: RePEc:irh:wpaper:dt35
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  1. Ellis, Randall P, 1989. "Employee Choice of Health Insurance," The Review of Economics and Statistics, MIT Press, vol. 71(2), pages 215-23, May.
  2. Pierre-Andre Chiappori & Bernard Salanie, 2000. "Testing for Asymmetric Information in Insurance Markets," Journal of Political Economy, University of Chicago Press, vol. 108(1), pages 56-78, February.
  3. Denise Doiron & Glenn Jones & Elizabeth Savage, 2008. "Healthy, wealthy and insured? The role of self-assessed health in the demand for private health insurance," Health Economics, John Wiley & Sons, Ltd., vol. 17(3), pages 317-334.
  4. Buchmueller, Thomas C. & Feldstein, Paul J., 1997. "The effect of price on switching among health plans," Journal of Health Economics, Elsevier, vol. 16(2), pages 231-247, April.
  5. Ettner, Susan L., 1997. "Adverse selection and the purchase of Medigap insurance by the elderly," Journal of Health Economics, Elsevier, vol. 16(5), pages 543-562, October.
  6. Thomas C. Buchmueller & Agnès Couffinhal & Michel Grignon & Marc Perronin, 2002. "Access to Physician Services: Does Supplemental Insurance Matter? Evidence from France," NBER Working Papers 9238, National Bureau of Economic Research, Inc.
  7. 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.
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