American Economic Journal:
Applied Economics
ISSN 1945-7782 (Print) | ISSN 1945-7790 (Online)
Adverse Selection in Low-Income Health Insurance Markets: Evidence from an RCT in Pakistan
American Economic Journal: Applied Economics
vol. 15,
no. 3, July 2023
(pp. 313–40)
Abstract
We present robust evidence on adverse selection in hospitalization insurance for low-income individuals that received first-time access to insurance. A large randomized control trial from Pakistan allows us to separate adverse selection from moral hazard, estimate how selection changes at different points of the demand curve, and test simple measures to limit adverse selection. The results reveal substantial selection in individual policies, leading to welfare losses and the threat of a market breakdown. Bundling insurance policies at the household level or higher almost eliminates adverse selection, thus mitigating its welfare consequences and facilitating sustainable insurance supply.Citation
Fischer, Torben, Markus Frölich, and Andreas Landmann. 2023. "Adverse Selection in Low-Income Health Insurance Markets: Evidence from an RCT in Pakistan." American Economic Journal: Applied Economics, 15 (3): 313–40. DOI: 10.1257/app.20200639Additional Materials
JEL Classification
- D82 Asymmetric and Private Information; Mechanism Design
- G22 Insurance; Insurance Companies; Actuarial Studies
- I13 Health Insurance, Public and Private
- I18 Health: Government Policy; Regulation; Public Health
- O15 Economic Development: Human Resources; Human Development; Income Distribution; Migration
- O16 Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
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