Do Health Plans Risk-Select?

An Audit Study on Germany's Social Health Insurance

Published In: Journal of Public Economics, v. 96, nos. 9-10, Oct. 2012, p. 750-759

Posted on RAND.org on October 01, 2012

by Sebastian Bauhoff

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This paper evaluates whether health plans in Germany's Social Health Insurance select on an easily observable predictor of risk: geography. To identify plan behavior separately from concurrent demand-side adverse selection, I implement a double-blind audit study in which plans are contacted by fictitious applicants from different locations. I find that plans are less likely to respond and follow-up with applicants from higher-cost regions, such as West Germany. The results suggest that supply-side selection may emerge even in heavily regulated insurance markets. The prospect of risk selection by firms has implications for studies of demand-side selection and regulatory policy in these settings.

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