Health Insurance and Lifestyle Choices: Identifying "Ex Ante" Moral Hazard in the US Market

There is extensive debate in the literature about the practical significance of ex ante moral hazard in health insurance markets. This paper uses data from the U.S. Panel Study of Income Dynamics (1999-2003) to estimate a structural model of individual choice of insurance coverage and four lifestyle...

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Bibliographic Details
Published in:Geneva papers on risk and insurance. Issues and practice 2008-10, Vol.33 (4), p.627-644
Main Author: Stanciole, Anderson E.
Format: Article
Language:English
Subjects:
Age
Behavior
Correlation analysis
Costs
Economics and Finance
Expenditures
Finance
Health behavior
Health care policy
Health insurance
Health risk assessment
Health risks
Homeowners insurance
Insurance
Insurance coverage
Insurance premiums
Lack of exercise
Lifestyle
Lifestyles
Medicaid
Medical personnel
Medicare
Moral hazard
Moral hazard models
Obesity
Older people
Preventive medicine
Risk aversion
Risk Management
Smoking
Studies
Unobservables
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Summary:There is extensive debate in the literature about the practical significance of ex ante moral hazard in health insurance markets. This paper uses data from the U.S. Panel Study of Income Dynamics (1999-2003) to estimate a structural model of individual choice of insurance coverage and four lifestyle decisions: heavy smoking, heavy drinking, lack of exercise and obesity. The results show that health insurance has significant incentive effects on lifestyle choices, increasing the propensity to heavy smoking, lack of exercise and obesity and decreasing the propensity to heavy drinking. There is also significant correlation between the errors of each equation. The results might have implications for the design of health financing policies.
ISSN:1018-5895
1554-964X
1468-0440
DOI:10.1057/gpp.2008.27