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Demand and Selection Effects in Supplemental Health Insurance in Germany

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Abstract

This paper empirically assesses selection effects and determinants of the demand for supplemental health insurance that covers hospital and dental benefits in Germany. Our representative data set provides doctor-diagnosed indicators of the individual’s health status, risk attitude, demand for medical services and insurance purchases in other lines of insurance, as well as rich demographic and socio-economic information. Controlling for a wide range of individual preferences, we find evidence that individuals aged 65 and younger with hospital coverage are sicker than those without. In addition, insurance propensity and income are the most important drivers of the demand for supplemental hospital and dental coverage.

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Notes

  1. Saliba and Ventelou (2007); van de Ven and Schut (2008); Schokkaert et al. (2010); Simon (2013).

  2. McCall et al. (1986); Garfinkel et al. (1987); Pourat et al. (2000); Goldman and Zissimopoulos (2003).

  3. Association of German Private Health-care Insurers (2012).

  4. Pauly et al. (1995).

  5. The front-loading accounts for higher future expected costs which result from the expected deterioration of the policyholder’s health over time.

  6. Browne and Hofmann (2013).

  7. Pauly (1974); Rothschild and Stiglitz (1976); Wilson (1977).

  8. In auto insurance, the majority of studies have not found evidence of adverse selection (e.g. Chiappori and Salanié, 2000; Kim et al., 2009; Dionne et al., 2001; Zavadil, 2011). Finkelstein and Poterba (2004) find evidence of adverse selection with respect to the choice of different types of annuity insurance policies but not with respect to annuity size. Cohen and Siegelman (2010) provide a comprehensive survey on empirical findings of adverse selection in insurance.

  9. Marquis and Phelps (1987).

  10. Woolfe and Goddeeris (1991); Browne and Doerpinghaus (1994); Ettner (1997).

  11. Christoph (2003) and Kapfer (2008).

  12. Schmitz (2011).

  13. De Meza and Webb (2001).

  14. Bauer et al. (2015).

  15. Schokkaert et al. (2010).

  16. Saliba and Ventelou (2007); Shmueli (2010).

  17. See, e.g. Hendel and Lizzeri (2003).

  18. Until 2008, SHI funds charged different contribution rates depending on their risk structure and profitability. With the introduction of the health fund (‘Gesundheitsfonds’) in 2009, uniform premiums of 15.5 per cent have been introduced in SHI. See Simon (2013) for an overview of the German health insurance system.

  19. Differences in the percentages of SHI insureds who hold SuppHI, from SOEP data and the Association of German Private Health-care Insurers arise from the fact that individuals under age 17 years are not included in the SOEP.

  20. Travel abroad policies usually cover transportation home in cases of medical emergencies as well as medical bills incurred due to emergencies when travelling and which were not covered by SHI. SHI funds may only cover a fraction or nothing at all in countries without bilateral health insurance agreements.

  21. Cohen and Siegelman (2010).

  22. Bolhaar et al. (2012).

  23. Crossley and Kennedy (2002) find that the reliability of self-assessed health status is strongly related to other observable variables such as age, income and occupation.

  24. We merge the 2009 and 2011 sickness data into the 2008 and 2010 data set because doctor-diagnosed diseases were not surveyed in 2008 and 2010 and information on SuppHI is not available in the 2009 data.

  25. Dardanoni and Li Donni (2012).

  26. Kapfer (2008).

  27. Finkelstein and McGarry (2006).

  28. Pourat et al. (2000); Saliba and Ventelou (2007); Schokkaert et al. (2010).

  29. Browne et al. (2015).

  30. Garfinkel et al. (1987).

  31. Fang et al. (2008).

  32. Borrell et al. (2001).

  33. Saliba and Ventelou (2007).

  34. Vargas and Elhewaihi (2008).

  35. Browne and Doerpinghaus (1994).

  36. Ettner (1997).

  37. Dohmen et al. (2011).

  38. Dionne and Eeckhoudt (1985); Briys and Schlesinger (1990).

  39. Households answer a household questionnaire. All household members then answer an individual questionnaire. The data set maps individuals to their households. Individuals are allowed to participate from the age of 17 years.

  40. Wagner et al. (2007).

  41. In 2009, no questions on SuppHI were included in the SOEP questionnaire.

  42. We later run a robustness check with a larger data set for each observation period using a dummy variable adjustment approach, where missing values are replaced by means.

  43. The variable Sick in 2009 (2011) also contains individuals who were affected by more than one disease; thus, 32.5 per cent (36.6 per cent) is not the sum of the means of the different chronic diseases.

  44. The SF-12 surveys 12 health and well-being questions and creates an index of an individual’s well-being Kapfer (2008); Vargas and Elhewaihi (2008); Schmitz (2011); Browne (1992).

  45. Regression results are available directly from the authors upon email request. We omit them here to keep the paper to an acceptable length.

  46. These results are available upon email request.

  47. Note that we do not use the 2010 data set here as there is no information on supplemental health insurance 2009. Therefore, we cannot tell if an individual had uninterrupted coverage for the last three years.

  48. The variance inflation factor (VIF) in the full model did not exceed a value of 2 for any variable used in the regression, which indicates no multicollinearity issues.

  49. When only considering the compulsory insured in the next section, significance is only at the 10 per cent level for both waves; see Table 8.

  50. Schokkaert et al. (2010) and Kapfer (2008).

  51. Actual sickness was included in the SOEP in 2009 for the first time. Data on self-reported health and medical service intensity were available previously.

  52. We do not find significant effects of gender or risk attitude when accounting for the different perceptions of risk among male and female individuals by introducing the interaction of male and risk attitude.

  53. Ettner (1997). These findings are in line with those from previous studies Berghman and Meerbergen (2005); Kapfer (2008); Vargas and Elhewaihi (2008); Schokkaert et al. (2010).

  54. We could theoretically go back more years, but this would reduce the sample size to a level which will make meaningful statistical results questionable. Furthermore, the demand for SuppHI has been promoted by the health reform in 2004.

  55. Sample statistics for the subsample of compulsory insured are directly available from the authors upon email request.

  56. Kapfer (2008); Schmitz (2011).

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Authors and Affiliations

  1. Institute for Health Care & Public Management, University of Hohenheim, Stuttgart, Germany

    Renate Lange & Jörg Schiller

  2. School of Risk Management, Insurance and Actuarial Science, St. John’s University, New York, NY, USA

    Petra Steinorth

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  1. Renate Lange
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  2. Jörg Schiller
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  3. Petra Steinorth
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Correspondence to Jörg Schiller.

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Lange, R., Schiller, J. & Steinorth, P. Demand and Selection Effects in Supplemental Health Insurance in Germany. Geneva Pap Risk Insur Issues Pract 42, 5–30 (2017). https://doi.org/10.1057/s41288-016-0023-2

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