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Seminar

Health Insurance Decision: a Theoretical and Experimental Investigation

  • Location
    Erasmus University,
    Rotterdam
  • Date and time

    May 09, 2019
    12:00 - 13:00

Abstract

Health insurance coverage decisions are still not fully understood. Although risk preference over financial losses, distortion of probabilities and size of medical expenses determine health insurance decisions, they don’t explain all the variance observed in voluntary health insurance coverage.

Based on the evidence that health insurance reduces health damages by lowering financial barriers on access to care, we examine health insurance decision using a bivariate model with financial and health outcomes. In this paper, we derive theoretical predictions on the effects of 1) preference for health relative to wealth, 2) risk aversion in the financial domain and 3) correlation aversion, on the demand for health insurance. We test these predictions using data collected in a laboratory experiment. In line with our theoretical model, our empirical results suggest that health preference only explains health insurance through treatment choice, and correlation averse individuals purchase higher levels of health insurance coverage.(Joint work with David Crainich (IESEG), Florence Jusot (Université Paris Dauphine), Doriane Mignon (Université Paris Dauphine))