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 Oct 1, 2012
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.