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Supplementary health insurance in the Colombian managed care system: Adverse or advantageous selection?

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  • Bardey, David
  • Buitrago, Giancarlo

Abstract

The aim of this article is to estimate the type of selection that exists in the voluntary health insurance market in Colombia where the compulsory coverage is implemented through a managed care competition. We build a panel database that combines individuals’ information from the Ministry of Health and a database provided by two private health insurers. We perform the correlation test for health expenditure and coverage. Following Fang et al. (2008), we condition the estimation on health controls that are available to the econometrician but not to insurers. In both cases we obtain a positive correlation, suggesting that adverse selection predominates. In order to rule out some moral hazard effects, we estimate the correlation between previous health service consumption and insurance purchase. The positive correlation obtained is robust to the inclusion of controls for diagnosis, suggesting that despite some risk selection strategies, health insurers are not protected from adverse selection.

Suggested Citation

  • Bardey, David & Buitrago, Giancarlo, 2016. "Supplementary health insurance in the Colombian managed care system: Adverse or advantageous selection?," TSE Working Papers 16-709, Toulouse School of Economics (TSE).
  • Handle: RePEc:tse:wpaper:31080
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    References listed on IDEAS

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    1. Liran Einav & Amy Finkelstein & Stephen P. Ryan & Paul Schrimpf & Mark R. Cullen, 2013. "Selection on Moral Hazard in Health Insurance," American Economic Review, American Economic Association, vol. 103(1), pages 178-219, February.
    2. de Meza, David & Webb, David C, 2001. "Advantageous Selection in Insurance Markets," RAND Journal of Economics, The RAND Corporation, vol. 32(2), pages 249-262, Summer.
    3. Blomqvist, Ake, 1997. "Optimal non-linear health insurance," Journal of Health Economics, Elsevier, vol. 16(3), pages 303-321, June.
    4. Hanming Fang & Michael P. Keane & Dan Silverman, 2008. "Sources of Advantageous Selection: Evidence from the Medigap Insurance Market," Journal of Political Economy, University of Chicago Press, vol. 116(2), pages 303-350, April.
    5. Buitrago, Giancarlo & Bardey, David, 2015. "Voluntary Health Plan Subsidies and Public Expenditure," Documentos CEDE Series 212854, Universidad de Los Andes, Economics Department.
    6. Liran Einav & Amy Finkelstein, 2011. "Selection in Insurance Markets: Theory and Empirics in Pictures," Journal of Economic Perspectives, American Economic Association, vol. 25(1), pages 115-138, Winter.
    7. Marcelo Resende & Rodrigo Zeidan, 2010. "Adverse selection in the health insurance market: some empirical evidence," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 11(4), pages 413-418, August.
    8. Alma Cohen, 2005. "Asymmetric Information and Learning: Evidence from the Automobile Insurance Market," The Review of Economics and Statistics, MIT Press, vol. 87(2), pages 197-207, May.
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    Cited by:

    1. Catalina Gutiérrez S. & Nicolás Gómez, 2018. "El sistema de salud colombiano en las próximas décadas: cómo avanzar hacia la sostenibilidad y la calidad en la atención," Cuadernos de Fedesarrollo 016251, Fedesarrollo.
    2. MariÌ a Elvira Guerra-CuÌ jar & Mounu Prem & Paul Rodríguez-Lesmes & Juan F. Vargas, 2020. "The Peace Baby Boom: Evidence from Colombia’s peace agreement with the FARC," Documentos de Trabajo LACEA 018485, The Latin American and Caribbean Economic Association - LACEA.
    3. Ko, Hansoo, 2020. "Moral hazard effects of supplemental private health insurance in Korea," Social Science & Medicine, Elsevier, vol. 265(C).

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    More about this item

    Keywords

    Information asymmetry; Health insurance; Adverse Selection; Correlation test;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private

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