Selection on Moral Hazard in Health Insurance
Liran Einav, Amy Finkelstein, Stephen P. Ryan, Paul Schrimpf, Mark R. Cullen
American Economic Review · 2013 · Volume 103 · Issue 1
Abstract
We use employee-level panel data from a single firm to explore the possibility that individuals may select insurance coverage in part based on their anticipated behavioral ("moral hazard") response to insurance, a phenomenon we label "selection on moral hazard." Using a model of plan choice and medical utilization, we present evidence of heterogenous moral hazard as well as selection on it, and explore some of its implications. For example, we show that, at least in our context, abstracting from selection on moral hazard could lead to overestimates of the spending reduction associated with introducing a high-deductible health insurance option. (JEL D82, G22, I13, J32)
Keywords
Asymmetric and Private Information, Mechanism Design, Insurance, Insurance Companies, Health Insurance, Public and Private, Nonwage Labor Costs and Benefits, Private Pensions
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