Voluntary private health insurance demand determinants and risk preferences: Evidence from SHARE.

Abstract

The demand for voluntary private health insurance (VPHI) in universal coverage health systems in Europe raises some questions. The aim of this paper is to determine the factors that explain the decision to purchase VPHI, to analyse the role of individual risk attitudes and self-assessed health (SAH) in purchasing VPHI, to explore the factors that explain individual risk preferences, and to test how SAH relates to those preferences. To achieve this aim, two recursive simultaneous probits are estimated using data collected by SHARE, wave 6. The main results indicate that people who are more satisfied with the health system coverage are more likely to buy VPHI; SAH is negative correlated with VPHI, but being a risk taker contributes to that decision; however, being a risk taker is positively influenced by good health status. This paper contributes to the discussion on the role of SAH and risk preferences in the decision to buy VPHI. It brings new insights for the health insurance companies and for health policy makers. HIGHLIGHTS: People who are more satisfied with the health system coverage are more likely to buy voluntary private health insurance. The longer the planning horizon assumed by individuals, the greater the likelihood they are risk takers. People reporting being risk takers are more likely to have taken out voluntary private health insurance. Self-assessed health influences the decision to buy voluntary private health insurance in two ways: a direct one, where better health lowers the odds of having insurance, and an indirect one through risk taking, which increases the odds of having insurance. Contributions of this work are mainly for health policy makers and insurance companies.