How profitable is a voluntary deductible in health insurance for the consumer?
To counteract moral hazard in health insurance, insured can be offered a voluntary deductible (VD) in return for a premium rebate. In the Dutch mandatory basic health insurance however, only 11 per cent of the insured opted for a VD in 2014. Several determinants could affect the decision to opt for a VD. This paper examines one of these determinants: the financial profitability. A VD is profitable for the consumer if the out-of-pocket expenses do not exceed the offered premium rebate. The empirical analyses, based upon individual-level data on costs and characteristics of over 800,000 Dutch insured, show that a VD of €500 on top of the mandatory deductible of €360 would have been financially profitable for 48 per cent of the Dutch insured given the average premium rebate of € 240 in 2014. If the whole population had a VD, most insured would obtain either the maximum loss (44 per cent) or the maximum gain (41 per cent). A VD is profitable for males, young insured, healthy insured and insured with few healthcare expenses in the past. To further reduce moral hazard, the following strategies can be used to increase the number of insured opting for a VD: provide insured with information regarding the VD and introduce a shifted deductible.
Institute of Health Policy and Management, Erasmus University Rotterdam, P.O. Box 1738, 3000 DR Rotterdam, The Netherlands. Electronic address: vanwinssen@bmg.eur.nl.
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van Winssen
Institute of Health Policy and Management, Erasmus University Rotterdam, P.O. Box 1738, 3000 DR Rotterdam, The Netherlands.
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van Kleef
Institute of Health Policy and Management, Erasmus University Rotterdam, P.O. Box 1738, 3000 DR Rotterdam, The Netherlands.
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van de Ven
D000367:Age Factors; D003258:Consumer Behavior; D003669:Deductibles and Coinsurance / Q000191:economics*; D005260:Female; D005102:Health Expenditures; D061889:Healthcare Financing; D006801:Humans; D007348:Insurance, Health / Q000191:economics*; D008297:Male; D009426:Netherlands
Financial profitability; Health insurance; Moral hazard; Voluntary deductibles