Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/270587 
Year of Publication: 
2020
Series/Report no.: 
CINCH Series No. 2020/01
Publisher: 
University of Duisburg-Essen, CINCH - Health Economics Research Center, Essen
Abstract: 
To insure policyholders against contemporaneous health expenditure shocks and future reclassification risk, long-term health insurance constitutes an alternative to community-rated short-term contracts with an individual mandate. Relying on unique claims panel data from a large private insurer in Germany, we study a real-world long-term health insurance application with a life-cycle perspective. We show that German long-term health insurance (GLTHI) achieves substantial welfare gains compared to a series of risk-rated short-term contracts. Although, by its simple design, the premium setting of GLTHI contract departs significantly from the optimal dynamic contract, surprisingly we only find modest welfare differences between the two. Finally, we conduct counterfactual policy experiments to illustrate the welfare consequences of integrating GLTHI into a system with a "Medicare-like" public insurance that covers people above 65.
Subjects: 
Long-Term Health Insurance
Individual Private Health Insurance
Health Care Reform
JEL: 
G22
I11
I18
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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