Heterogeneous Moral Hazard in Supplementary Health Insurance

Many OECD countries present a mixed health insurance system where individuals benefit from a mandatory national health insurance (NHI), and can enhance their coverage in the supplementary health insurance (SHI) market. SHI contracts tend to cover medical goods and services with higher prices, a signal for possibly higher quality and reduced waiting times. In this context, estimating the impact of voluntary SHI on healthcare consumption (moral hazard) becomes critical not only for private insurers but also for regulators. Concerns are rising about the inflationary impact of SHI on medical prices and the role of voluntary insurance in access to care. Estimating moral hazard in the SHI context is also methodologically challenging. When health insurance is voluntary, the estimation of this impact has to deal with endogenous selection and with a possible heterogeneity in moral hazard: some individuals may buy more insurance because they expect an increase in their consumption due to better coverage.

In this paper we investigate the relationships between healthcare use, decision to take out SHI and response to better coverage with a model that specifies individual heterogeneity in demand for healthcare and in moral hazard. We set the analysis in the French context where individuals can voluntary take out SHI which covers a quicker access to medical services. We focus on the demand for specialists who balance bill their patients, i. e. charge them more than the regulated fee. The demand for specialists who balance bill relies on preferences, and on beliefs that they provide better care quality. Individuals are likely to be heterogeneous in their preferences and beliefs. Since these unobservable characteristics both drive demand for care and decision to take out SHI, this can induce selection on moral hazard. Marginal treatment effects (MTE) estimators have been developed to capture the impact of a treatment likely to vary across individuals, when they select themselves into treatment. We use MTE to estimate the heterogeneous effect of SHI coverage on balance billing consumption on a French database of 58,519 individuals observed in 2012.

We find evidence of individual heterogeneity in the response to better coverage and of selection on moral hazard. Individuals with unobserved characteristics that make them more likely to ask for comprehensive SHI are also those who exhibit the largest increase in balance billing per consultation. As for the influence of observed characteristics, we also find that individuals' income is a strong determinant of balance billing consumption and influences the response to better coverage. While the poor consume less balance billing without insurance, better coverage yields a sharper increase of their care consumption. To sum up, when SHI is voluntary, the inflationary impact of SHI coverage on balance billing might be worsened by selection on moral hazard. Our policy conclusions as regards the role of income are of different nature. The negative effect of income on the demand for balance billing consultations coupled with its positive effect on moral hazard provides evidence that SHI plays an important role in access to care for low-income individuals.