IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/26870.html
   My bibliography  Save this paper

German Long-Term Health Insurance: Theory Meets Evidence

Author

Listed:
  • Juan Pablo Atal
  • Hanming Fang
  • Martin Karlsson
  • Nicolas R. Ziebarth

Abstract

By insuring policyholders against contemporaneous health expenditure shocks and future reclassification risk, long-term health insurance contracts are a viable alternative to community-rated short-term contracts with an individual mandate. German long-term health insurance (GLTHI) is the largest market for private long-term health insurance contracts in the world. It features a simple design with initial risk-rating followed by guaranteed-renewable constant premiums over the lifecycle. We estimate the key ingredients of a life-cycle model to assess the welfare effects of the GLTHI contract and compare them to the optimal contract. This comparison provides further lessons about the trade-offs of long-term health insurance design.

Suggested Citation

  • Juan Pablo Atal & Hanming Fang & Martin Karlsson & Nicolas R. Ziebarth, 2020. "German Long-Term Health Insurance: Theory Meets Evidence," NBER Working Papers 26870, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:26870
    Note: EH IO PE
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w26870.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Werbeck, Anna & Wübker, Ansgar & Ziebarth, Nicolas R., 2021. "Cream skimming by health care providers and inequality in health care access: Evidence from a randomized field experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 188(C), pages 1325-1350.
    2. 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.
    3. Joachim R. Frick & Stephen P. Jenkins & Dean R. Lillard & Oliver Lipps & Mark Wooden, 2007. "European Data Watch: The Cross-National Equivalent File (CNEF) and its Member Country Household Panel Studies," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 127(4), pages 627-654.
    4. Florian Baumann & Volker Meier & Martin Werding, 2008. "Transferable Ageing Provisions in Individual Health Insurance Contracts," German Economic Review, Verein für Socialpolitik, vol. 9(3), pages 287-311, August.
    5. Schmitz, Hendrik & Westphal, Matthias, 2017. "Informal care and long-term labor market outcomes," Journal of Health Economics, Elsevier, vol. 56(C), pages 1-18.
    6. Igal Hendel & Alessandro Lizzeri, 2003. "The Role of Commitment in Dynamic Contracts: Evidence from Life Insurance," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(1), pages 299-328.
    7. Juan Pablo Atal & Hanming Fang & Martin Karlsson & Nicolas R. Ziebarth, 2019. "Exit, Voice, or Loyalty? An Investigation Into Mandated Portability of Front‐Loaded Private Health Plans," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 86(3), pages 697-727, September.
    8. Larry G. Epstein & Stanley E. Zin, 2013. "Substitution, risk aversion and the temporal behavior of consumption and asset returns: A theoretical framework," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 12, pages 207-239, World Scientific Publishing Co. Pte. Ltd..
    9. Polyakova, Maria, 2016. "Risk selection and heterogeneous preferences in health insurance markets with a public option," Journal of Health Economics, Elsevier, vol. 49(C), pages 153-168.
    10. Geyer, Johannes & Steiner, Viktor, 2014. "Future public pensions and changing employment patterns across birth cohorts," Journal of Pension Economics and Finance, Cambridge University Press, vol. 13(2), pages 172-209, April.
    11. Hendrik Schmitz & Nicolas R. Ziebarth, 2017. "Does Price Framing Affect the Consumer Price Sensitivity of Health Plan Choice?," Journal of Human Resources, University of Wisconsin Press, vol. 52(1), pages 88-127.
    12. Engels, Barbara & Geyer, Johannes & Haan, Peter, 2017. "Pension incentives and early retirement," Labour Economics, Elsevier, vol. 47(C), pages 216-231.
    13. Emmanuel Saez & Joel Slemrod & Seth H. Giertz, 2012. "The Elasticity of Taxable Income with Respect to Marginal Tax Rates: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 50(1), pages 3-50, March.
    14. Pauly, Mark V & Kunreuther, Howard & Hirth, Richard, 1995. "Guaranteed Renewability in Insurance," Journal of Risk and Uncertainty, Springer, vol. 10(2), pages 143-156, March.
    15. Patrick Hullegie & Tobias J. Klein, 2010. "The effect of private health insurance on medical care utilization and self‐assessed health in Germany," Health Economics, John Wiley & Sons, Ltd., vol. 19(9), pages 1048-1062, September.
    16. Christian Dustmann & Patrick A. Puhani & Uta Schönberg, 2017. "The Long‐term Effects of Early Track Choice," Economic Journal, Royal Economic Society, vol. 127(603), pages 1348-1380, August.
    17. Johann Eekhoff & Markus Jankowski & Anne Zimmermann, 2006. "Risk-Adjustment in Long-Term Health Insurance Contracts in Germany," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 31(4), pages 692-704, October.
    18. Athey, Susan & Imbens, Guido W., 2019. "Machine Learning Methods Economists Should Know About," Research Papers 3776, Stanford University, Graduate School of Business.
    19. Annette Hofmann & Mark Browne, 2013. "One-sided commitment in dynamic insurance contracts: Evidence from private health insurance in Germany," Journal of Risk and Uncertainty, Springer, vol. 46(1), pages 81-112, February.
    20. Bunnings, C,; & Schmitz, H,; & Tauchmann, H,; & Ziebarth, N.R,;, 2015. "How Health Plan Enrollees Value Prices Relative to Supplemental Benefits and Service Quality," Health, Econometrics and Data Group (HEDG) Working Papers 15/02, HEDG, c/o Department of Economics, University of York.
    21. Robert Nuscheler & Thomas Knaus, 2005. "Risk selection in the German public health insurance system," Health Economics, John Wiley & Sons, Ltd., vol. 14(12), pages 1253-1271, December.
    22. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(3), pages 488-500.
    23. Gert G. Wagner & Joachim R. Frick & Jürgen Schupp, 2007. "The German Socio-Economic Panel Study (SOEP) – Scope, Evolution and Enhancements," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 127(1), pages 139-169.
    24. Christian Dustmann & Patrick A. Puhani & Uta Schönberg, 2017. "The Long‐term Effects of Early Track Choice," Economic Journal, Royal Economic Society, vol. 127(603), pages 1348-1380, August.
    25. Marcus C. Christiansen & Martin Eling & Jan-Philipp Schmidt & Lorenz Zirkelbach, 2016. "Who is Changing Health Insurance Coverage? Empirical Evidence on Policyholder Dynamics," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 83(2), pages 269-300, June.
    26. repec:bla:germec:v:9:y:2008:i::p:287-311 is not listed on IDEAS
    27. Susan Athey & Guido W. Imbens, 2019. "Machine Learning Methods That Economists Should Know About," Annual Review of Economics, Annual Reviews, vol. 11(1), pages 685-725, August.
    28. Menahem E. Yaari, 1965. "Uncertain Lifetime, Life Insurance, and the Theory of the Consumer," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 32(2), pages 137-150.
    29. Amy Finkelstein & Kathleen McGarry & Amir Sufi, 2005. "Dynamic Inefficiencies in Insurance Markets: Evidence from Long-Term Care Insurance," American Economic Review, American Economic Association, vol. 95(2), pages 224-228, May.
    30. Cochrane, John H, 1995. "Time-Consistent Health Insurance," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 445-473, June.
    31. Eric French & Elaine Kelly & Martin Karlsson & Tobias J. Klein & Nicolas R. Ziebarth, 2016. "Skewed, Persistent and High before Death: Medical Spending in Germany," Fiscal Studies, Institute for Fiscal Studies, vol. 37, pages 527-559, September.
    32. Eric French & Elaine Kelly & Eric French & Elaine Kelly, 2016. "Medical Spending around the Developed World," Fiscal Studies, Institute for Fiscal Studies, vol. 37, pages 327-344, September.
    33. Herring, Bradley & Pauly, Mark V., 2006. "Incentive-compatible guaranteed renewable health insurance premiums," Journal of Health Economics, Elsevier, vol. 25(3), pages 395-417, May.
    34. Juan Pablo Atal, 2019. "Lock-in in Dynamic Health Insurance Contracts: Evidence from Chile," PIER Working Paper Archive 19-020, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    35. Frick, Joachim R. & Jenkings, Stephen P. & Lillard, Dean R. & Lipps, Oliver & Wooden, Mark, 2007. "The Cross-National Equivalent File (CNEF) and Its Member Country Household Panel Studies," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 127(4), pages 627-654.
    36. Soheil Ghili & Ben Handel & Igal Hendel & Michael D. Whinston, 2019. "The Welfare Effects of Long-Term Health Insurance Contracts," Cowles Foundation Discussion Papers 2218, Cowles Foundation for Research in Economics, Yale University.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Martin Gaynor & Kate Ho & Robert J. Town, 2015. "The Industrial Organization of Health-Care Markets," Journal of Economic Literature, American Economic Association, vol. 53(2), pages 235-284, June.
    2. Fischer, Martin & Karlsson, Martin & Prodromidis, Nikolaos, 2021. "Long‐term Effects of Hospital Deliveries," CINCH Working Paper Series (since 2020) 74712, Duisburg-Essen University Library, DuEPublico.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Juan Pablo Atal & Hanming Fang & Martin Karlsson & Nicolas R. Ziebarth, 2020. "Long-Term Health Insurance: Theory Meets Evidence," PIER Working Paper Archive 20-009, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    2. Juan Pablo Atal & Hanming Fang & Martin Karlsson & Nicolas R. Ziebarth, 2019. "Exit, Voice, or Loyalty? An Investigation Into Mandated Portability of Front‐Loaded Private Health Plans," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 86(3), pages 697-727, September.
    3. Annette Hofmann & Mark Browne, 2013. "One-sided commitment in dynamic insurance contracts: Evidence from private health insurance in Germany," Journal of Risk and Uncertainty, Springer, vol. 46(1), pages 81-112, February.
    4. Soheil Ghili & Ben Handel & Igal Hendel & Michael D. Whinston, 2019. "Optimal Long-Term Health Insurance Contracts: Characterization, Computation, and Welfare Effects," Cowles Foundation Discussion Papers 2218R, Cowles Foundation for Research in Economics, Yale University, revised Jul 2020.
    5. Martin Gaynor & Kate Ho & Robert J. Town, 2015. "The Industrial Organization of Health-Care Markets," Journal of Economic Literature, American Economic Association, vol. 53(2), pages 235-284, June.
    6. Juan Pablo Atal, 2019. "Lock-in in Dynamic Health Insurance Contracts: Evidence from Chile," PIER Working Paper Archive 19-020, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    7. Soheil Ghili & Ben Handel & Igal Hendel & Michael D. Whinston, 2019. "Optimal Long-Term Health Insurance Contracts: Characterization, Computation, and Welfare Effects," Cowles Foundation Discussion Papers 2218R2, Cowles Foundation for Research in Economics, Yale University, revised May 2021.
    8. Pilny, Adam & Wübker, Ansgar & Ziebarth, Nicolas R., 2017. "Introducing risk adjustment and free health plan choice in employer-based health insurance: Evidence from Germany," Journal of Health Economics, Elsevier, vol. 56(C), pages 330-351.
    9. Christian Bührer & Stefan Fetzer & Christian Hagist, 2018. "Adverse Selection in the German Health Insurance System – The Case of Civil Servants," WHU Working Paper Series - Economics Group 18-06, WHU - Otto Beisheim School of Management.
    10. Ruo Jia & Zenan Wu, 2019. "Insurer commitment and dynamic pricing pattern," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 44(1), pages 87-135, March.
    11. Ruo Jia & Zenan Wu, 2019. "Insurer commitment and dynamic pricing pattern," The Geneva Papers on Risk and Insurance Theory, Springer;International Association for the Study of Insurance Economics (The Geneva Association), vol. 44(1), pages 87-135, March.
    12. Marcus C. Christiansen & Martin Eling & Jan-Philipp Schmidt & Lorenz Zirkelbach, 2016. "Who is Changing Health Insurance Coverage? Empirical Evidence on Policyholder Dynamics," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 83(2), pages 269-300, June.
    13. Bührer, Christian & Fetzer, Stefan & Hagist, Christian, 2020. "Adverse selection in the German Health Insurance System – the case of civil servants," Health Policy, Elsevier, vol. 124(8), pages 888-894.
    14. Sebastián Fleitas & Gautam Gowrisankaran & Anthony Lo Sasso, 2018. "Reclassification Risk in the Small Group Health Insurance Market," NBER Working Papers 24663, National Bureau of Economic Research, Inc.
    15. Benjamin R. Handel & Igal Hendel & Michael D. Whinston, 2017. "The Welfare Effects of Long-Term Health Insurance Contracts," NBER Working Papers 23624, National Bureau of Economic Research, Inc.
    16. Susanna Kochskämper, 2012. "Reformdebatten in der Krankenversicherung vor dem Hintergrund des europäischen Binnenmarktes," Otto-Wolff-Institut Discussion Paper Series 02/2012, Otto-Wolff-Institut für Wirtschaftsordnung, Köln, Deutschland.
    17. Pashchenko, Svetlana & Porapakkarm, Ponpoje, 2015. "Welfare costs of reclassification risk in the health insurance market," Journal of Macroeconomics, Elsevier, vol. 45(C), pages 21-44.
    18. Soheil Ghili & Ben Handel & Igal Hendel & Michael D. Whinston, 2019. "The Welfare Effects of Long-Term Health Insurance Contracts," Cowles Foundation Discussion Papers 2218, Cowles Foundation for Research in Economics, Yale University.
    19. Wiseman, Thomas, 2018. "Competitive long-term health insurance," Journal of Health Economics, Elsevier, vol. 58(C), pages 144-150.
    20. Ponpoje Porapakkarm & Svetlana Pashchenko, 2011. "Front-loaded contracts in health insurance market: How valuable is guaranteed renewability?," 2011 Meeting Papers 1268, Society for Economic Dynamics.

    More about this item

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:26870. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.