Private Health Insurance and Financial Risk Taking in Spain—The Moderating Effect of Subjective Risk Tolerance

Abstract

This study focuses on the effect of private health insurance on financial risk taking in Spanish households. According to the arguments related to the background risk, we propose two hypotheses: the first predicts a positive relationship between health insurance and risk taking and the second asserts that attitude to risk moderates this relationship. Spain is a good laboratory because it has a National Health System (NHS) that offers healthcare coverage to the entire population, which could eliminate the effect of health insurance on risk taking. Based on a sample of 6110 households obtained from the Household Finance Survey (EFF), our results confirm both hypotheses. Specifically, we show that private health insurance significantly increases a household's portfolio risk, especially in households with greater risk aversion. The results are concordant with the scarce amount of previous empirical evidence obtained in other contexts and are robust for different subsamples and estimation methods.