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

Read More

Access further information on this document at Elsevier, B.V

This article was published outside of RAND. The full text of the article can be found at the link above.

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.

This report is part of the RAND Corporation external publication series. Many RAND studies are published in peer-reviewed scholarly journals, as chapters in commercial books, or as documents published by other organizations.

The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.