Abstract
Abstract This paper explores the existence of ex-ante moral hazard in private health insurance in Brazil. Before the advent of illness, insured individuals have no incentives to seek preventive care if it is not previously contractible. The data set comprises longitudinal administrative records of health care utilization from a Brazilian employer-sponsored health insurance plan. The empirical strategy is based on an exogenous and anticipated shock in health insurance coverage not associated with health conditions. The results show an increase of up to 17% on medical visits and 22% on diagnostic tests due to the loss of health insurance. Medical visits start to increase five months before the individual leaves the health insurance pool, reaching its peak at two months prior to exit. For diagnostic tests, the increase was observed only in the last two months before the loss of health insurance coverage.
Highlights
Moral hazard is a well-known fact associated with consumer behaviour in the context of health insurance coverage (Newhouse, 1993; Arrow, 1963; Pauly, 1968; Zeckhauser, 1970)
Ex-ante moral hazard refers to situations before the advent of illness, when individuals have no incentives for preventive care
Having health insurance coverage can lead to individual underinvestment in preventive care, if it is not contractible, that can be interpreted as an ex-ante moral hazard (EAMH), as it usually affects the future costs of illness
Summary
Moral hazard is a well-known fact associated with consumer behaviour in the context of health insurance coverage (Newhouse, 1993; Arrow, 1963; Pauly, 1968; Zeckhauser, 1970). Two distinct types of moral hazard are observed in individual behaviour: ex-ante and ex-post moral hazard (Zweifel & Manning, 2000). Ex-post moral hazard is related to the overuse of health care services observed in the presence of health insurance once an illness event has occurred. Ex-ante moral hazard refers to situations before the advent of illness, when individuals have no incentives for preventive care. Having health insurance coverage can lead to individual underinvestment in preventive care, if it is not contractible, that can be interpreted as an ex-ante moral hazard (EAMH), as it usually affects the future costs of illness. Several factors may affect the individual choice of preventive care, for instance, opportunity costs, risk aversion, or the effect of ill health on the utility of such care
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