Does health care program participation favor advantageous selection? Some econometric results from insurance company data
Steve Briand  1, *@  , Jean-Yves Lesueur  2@  
1 : Laboratoire de Sciences Actuarielle et Financière  (SAF)
Université Claude Bernard Lyon 1 : EA2429
50, avenue Tony Garnier 69007 Lyon -  France
2 : Groupe dánalyse et de théorie économique  (GATE Lyon Saint-Étienne)
Centre National de la Recherche Scientifique : UMR5824
93, chemin des Mouilles 69130 Écully --- 6, rue Basse des Rives 42023 Saint-Étienne cedex 02 -  France
* : Corresponding author

In France, since a recent reform, employers have to offer a complementary private health care insurance to workers and insurers have incentives to invest an increasing proportion of insurance premiums in prevention actions. Hence, these contracts are often coupled with a supply of free health prevention program. Since asymmetric information is often advanced as an explanation of the tightness of the Long-term Care (LTC) insurance market, we study these phenomena in the framework of the introduction of these new programs. Starting from the paper of Ehrlich and Becker (1972), we propose a theoretical model to study the equilibrium properties of the trade-off between self-protection and LTC insurance coverage decisions. We show that the presence of prevention program changes the nature of the trade-off between self-protection and insurance coverage decisions: the relation is still undetermined under the general case but becomes substitutable in the specific case of a fair premium. These properties are tested empirically with an original survey data set on policyholders, containing information on behavioral bias and individuals' preferences, as well as additional information unobservable for the insurer. We show that the ex-ante moral hazard effect is, in reality, driven by (non-rational) individuals' preferences when we consider non-rationality assumption. In addition, in line with the properties of the theoretical model in the general case, the prevention program encourages both self-protection effort and LTC insurance purchase: advantageous selection, previously unobservable for the insurer, passes through another channel and is consequently revealed.


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