From Awareness to Adverse Selection: Cardiovascular Disease Risk and Health Insurance Decisions
58 Pages Posted: 27 Jul 2015 Last revised: 11 Feb 2017
Date Written: February 10, 2017
Abstract
This paper tests whether cardiovascular disease (CVD) risk influences health insurance enrollment in Nigeria. CVDs are an increasing burden in developing countries. Although largely prevented by treatment of CVD risk factors like hypertension and diabetes, private insurance may restrict access to such treatment for fear of adverse selection. Using panel survey data on an insurance program that provides hypertension and diabetes treatment, we link measured CVD risk and self-reported cardiovascular (CV) health problems to subsequent enrollment. We find that awareness leads to adverse selection. Initially, few individuals report CV health problems and measured CVD risk does not predict enrollment. Over time, more individuals report CV health problems, and their privately observed CVD risk is predictive of enrollment. Thus, selection into health insurance is adverse when individuals become increasingly aware of their personal risk to develop CVDs. Public intervention in health insurance markets through for instance subsidies or mandatory enrollment may help improve access to CVD treatment and prevention.
Keywords: Asymmetric and Private Information; Unawareness; Microinsurance; Cardiovascular Disease
JEL Classification: D82, D83, I13
Suggested Citation: Suggested Citation