Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/76165
Authors: 
Becker, Karolin
Zweifel, Peter
Year of Publication: 
2005
Series/Report no.: 
Working Paper, Socioeconomic Institute, University of Zurich 0513
Abstract: 
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 offering 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, effected 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 offering differentiated products.
Subjects: 
health insurance
deductible
copayment
willingness-to-pay
adverse selection
JEL: 
C35
C93
D61
I11
I18
Document Type: 
Working Paper

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