Abstract
Purpose: The objective of this study is to analyze the effect of the results of medical tests on three health indicators, i.e. blood pressure, cholesterol level, and blood glucose level, for belief updating and willingness to pay for health insurance. Specifically, this study examined whether individuals update their belief on their health status after being informed the results of their medical tests. This study also investigated whether there is a significant difference between the willingness to pay for the individuals who were informed about the results of their medical tests and of individuals who were not informed about the results of their medical tests. Approach: This study utilizes laboratory experiments. There are two groups in the experiments: the treatment group and the control group. The individuals in the treatment group receive information on the results of the medical tests which cover blood pressure, glucose level and cholesterol level tests. The individuals in the control group do not receive any information. We compare the willingness to pay between the treatment group and the control group. Results: There are significant differences in the value of willingness to pay for health insurance premium based on prior belief (individuals’ belief prior to the medical tests) and on posterior belief (individuals’ belief after the medical tests) between control group and treatment group. Belief updating occurs when there is a difference between prior belief and posterior belief due the presence of an event. Value: This work contributes to the better understanding about the individual decision making on health insurance purchase. Conclusion: The medical tests on blood pressure, cholesterol level, and glucose level significantly affect the willingness to pay for health insurance premium. There are significant changes in individual’s posterior belief due to the information provided by the medical tests. An individual’s willingness to pay for health insurance premium may change due to a change in his or her health status belief.
Highlights
An individual’s willingness to pay (WTP) for health insurance or prepayment for health care depends on his or her economic and demographic condition, including his or her health status
For the Treatment Group: Stage 1: Subjects received a posted offer bidding to determine the value of willingness to pay for health insurance premiums
If there was a change in the subjective beliefs and values of willingness to pay for health insurance premiums, belief updating occured
Summary
An individual’s willingness to pay (WTP) for health insurance or prepayment for health care depends on his or her economic and demographic condition, including his or her health status. Several previous studies on willingness to pay for health insurance premium use the frequency of visits to the doctor or hospital during a specific time period as a proxy to health status [1, 2]. Insurance companies will not be willing to establish a contract with individuals possessing high probability to suffer from sickness. An individual’s decision to buy health insurance is determined by, among others, his or her subjective belief on health status. An individual will buy health insurance when he or she believes that possessing health insurance is beneficial since he or she is in a bad state of health, facing high probability to suffer from sickness, especially acute sickness
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