Cost Sharing in Health Insurance: An Instrument for Risk Selection?
Health insurance is potentially subject to risk selection, i.e. adverse selection on the part of consumers and cream skimming on the part of insurers. Adverse selection models predict that competitive health insurers can eschew high-risk individuals by oï¿½ering contracts with low deductibles or co-payment rates, while attracting low-risk individuals with higher copayments, resulting in a separating equilibrium. This contribution seeks to determine whether in competitive Swiss social health insurance policies with deductibles in excess of the legal minimum do indeed serve as an instrument of risk selection. In a discrete choice experiment, eï¿½ected in 2003, some 1,000 individuals were given the hypothetical choice of alternative insurance contracts that differed both in terms of deductibles and copayments and in bene.ts covered. Results suggest that healthy individuals, i.e. those not having consulted medical services during the past six months, were more likely to select a policy with a high deductible. Compensation demanded for voluntarily accepting an increase in the annual deductible also varies with socioeconomic characteristics and increases with the current level of deductible, as predicted by theory and constituting evidence in favor of the risk selection hypothesis. The experiment allows to compute necessary premium reductions and provides guidance for the pricing policy of insurers when oï¿½ering diï¿½erentiated products.
|Date of creation:||Nov 2005|
|Date of revision:|
|Contact details of provider:|| Postal: Schönberggasse 1, CH-8001 Zürich|
Phone: +41-1-634 21 37
Fax: +41-1-634 49 82
Web page: http://www.econ.uzh.ch/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Christophe Courbage & Augustin de Coulon, 2004.
"Prevention and Private Health Insurance in the U.K,"
The Geneva Papers on Risk and Insurance,
The International Association for the Study of Insurance Economics, vol. 29(4), pages 719-727, October.
- Christophe Courbage & Augustin de Coulon, 2004. "Prevention and Private Health Insurance in the U.K," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 29(4), pages 719-727, October.
- 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.
- Fernando San Miguel & Mandy Ryan & Mabelle Amaya-Amaya, 2005. "'Irrational' stated preferences: a quantitative and qualitative investigation," Health Economics, John Wiley & Sons, Ltd., vol. 14(3), pages 307-322.
- Hensher, David & Louviere, Jordan & Swait, Joffre, 1998. "Combining sources of preference data," Journal of Econometrics, Elsevier, vol. 89(1-2), pages 197-221, November.
- Kenneth Train, 2003.
"Discrete Choice Methods with Simulation,"
Online economics textbooks,
SUNY-Oswego, Department of Economics, number emetr2.
- Manski, Charles F & Lerman, Steven R, 1977. "The Estimation of Choice Probabilities from Choice Based Samples," Econometrica, Econometric Society, vol. 45(8), pages 1977-88, November.
- Peter Zweifel & Stefan Felder & Markus Meiers, 1999. "Ageing of population and health care expenditure: a red herring?," Health Economics, John Wiley & Sons, Ltd., vol. 8(6), pages 485-496.
- Lehmann, Hansjorg & Zweifel, Peter, 2004. "Innovation and risk selection in deregulated social health insurance," Journal of Health Economics, Elsevier, vol. 23(5), pages 997-1012, September.
- Stefan Boes & Rainer Winkelmann, 2006.
"Ordered response models,"
AStA Advances in Statistical Analysis,
Springer;German Statistical Society, vol. 90(1), pages 167-181, March.
- Chiappori, P.A. & Durand, F. & Geoffard, P.Y., 1998.
"Moral Hazard and the Demand for Physician Services: First Lessons from a French Natural Experiment,"
DELTA Working Papers
98-05, DELTA (Ecole normale supérieure).
- Chiappori, Pierre-Andre & Durand, Franck & Geoffard, Pierre-Yves, 1998. "Moral hazard and the demand for physician services: First lessons from a French natural experiment," European Economic Review, Elsevier, vol. 42(3-5), pages 499-511, May.
- Ellis, Randall P. & McGuire, Thomas G., 1990. "Optimal payment systems for health services," Journal of Health Economics, Elsevier, vol. 9(4), pages 375-396, December.
- Martin Schellhorn, 2001. "The effect of variable health insurance deductibles on the demand for physician visits," Health Economics, John Wiley & Sons, Ltd., vol. 10(5), pages 441-456.
- Acton, Jan Paul, 1975. "Nonmonetary Factors in the Demand for Medical Services: Some Empirical Evidence," Journal of Political Economy, University of Chicago Press, vol. 83(3), pages 595-614, June.
- Daniel McFadden, 2001.
American Economic Review,
American Economic Association, vol. 91(3), pages 351-378, June.
- Louviere,Jordan J. & Hensher,David A. & Swait,Joffre D., 2000. "Stated Choice Methods," Cambridge Books, Cambridge University Press, number 9780521788304, September.
- Manning, Willard G, et al, 1987. "Health Insurance and the Demand for Medical Care: Evidence from a Randomized Experiment," American Economic Review, American Economic Association, vol. 77(3), pages 251-77, June.
- Mandy Ryan, 2004. "A comparison of stated preference methods for estimating monetary values," Health Economics, John Wiley & Sons, Ltd., vol. 13(3), pages 291-296.
- Asheim, Geir B. & Emblem, Anne Wenche & Nilssen, Tore, 2003.
"Deductibles in Health Insurances: Pay or Pain?,"
13/2002, Oslo University, Department of Economics.
- Anna Merino, 2003. "Demand for pharmaceutical drugs: A choice modelling experiment," Working Papers, Research Center on Health and Economics 704, Department of Economics and Business, Universitat Pompeu Fabra.
- David M. Cutler & Sarah J. Reber, 1998. "Paying for Health Insurance: The Trade-Off between Competition and Adverse Selection," The Quarterly Journal of Economics, Oxford University Press, vol. 113(2), pages 433-466.
- Viscusi, W Kip & Evans, William N, 1990. "Utility Functions That Depend on Health Status: Estimates and Economic Implications," American Economic Review, American Economic Association, vol. 80(3), pages 353-74, June.
- Samuelson, William & Zeckhauser, Richard, 1988. "Status Quo Bias in Decision Making," Journal of Risk and Uncertainty, Springer, vol. 1(1), pages 7-59, March.
- Renate Schubert, 1999. "Financial Decision-Making: Are Women Really More Risk-Averse?," American Economic Review, American Economic Association, vol. 89(2), pages 381-385, May.
- Mark V. Pauly, 1974. "Overinsurance and Public Provision of Insurance: The Roles of Moral Hazard and Adverse Selection," The Quarterly Journal of Economics, Oxford University Press, vol. 88(1), pages 44-62.
- Zweifel, Peter & Manning, Willard G., 2000. "Moral hazard and consumer incentives in health care," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 8, pages 409-459 Elsevier.
- Holly, Alberto & Gardiol, Lucien & Domenighetti, Gianfranco & Brigitte Bisig, 1998.
"An econometric model of health care utilization and health insurance in Switzerland,"
European Economic Review,
Elsevier, vol. 42(3-5), pages 513-522, May.
- Alberto HOLLY & Lucien GARDIOL & Gianfranco DOMENIGHETTI & Brigitte BISIG, 1998. "An Econometric Model of Health Care Utilization and Health Insurance in Switzerland," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 9803, Université de Lausanne, Faculté des HEC, DEEP.
- Wilson, Charles, 1977. "A model of insurance markets with incomplete information," Journal of Economic Theory, Elsevier, vol. 16(2), pages 167-207, December.
- Johannes Schwarze & Hanfried H. Andersen, 2001. "Kassenwechsel in der gesetzlichen Krankenversicherung: welche Rolle spielt der Beitragssatz?," Discussion Papers of DIW Berlin 267, DIW Berlin, German Institute for Economic Research.
- Raviv, Artur, 1979. "The Design of an Optimal Insurance Policy," American Economic Review, American Economic Association, vol. 69(1), pages 84-96, March.
- Anna Merino, 2003. "Demand for pharmaceutical drugs: A choice modelling experiment," Economics Working Papers 704, Department of Economics and Business, Universitat Pompeu Fabra.
- Steven Shavell, 1979. "On Moral Hazard and Insurance," The Quarterly Journal of Economics, Oxford University Press, vol. 93(4), pages 541-562.
- Gre[ss], Stefan & Groenewegen, Peter & Kerssens, Jan & Braun, Bernard & Wasem, Juergen, 2002. "Free choice of sickness funds in regulated competition: evidence from Germany and The Netherlands," Health Policy, Elsevier, vol. 60(3), pages 235-254, June.
- Strombom, Bruce A. & Buchmueller, Thomas C. & Feldstein, Paul J., 2002. "Switching costs, price sensitivity and health plan choice," Journal of Health Economics, Elsevier, vol. 21(1), pages 89-116, January.
- Spence, Michael, 1978. "Product differentiation and performance in insurance markets," Journal of Public Economics, Elsevier, vol. 10(3), pages 427-447, December.
- Chernew, Michael E. & Encinosa, William E. & Hirth, Richard A., 2000. "Optimal health insurance: the case of observable, severe illness," Journal of Health Economics, Elsevier, vol. 19(5), pages 585-609, September.
When requesting a correction, please mention this item's handle: RePEc:soz:wpaper:0513. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marita Kieser)
If references are entirely missing, you can add them using this form.