Adverse selection and risk selection in unregulated health insurance markets: Empirical evidence from South Africa's medical schemes.

Hansl, Birgit (2004) Adverse selection and risk selection in unregulated health insurance markets: Empirical evidence from South Africa's medical schemes. PhD thesis, London School of Economics and Political Science.

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Abstract

Health insurance arrangements developed in various social settings as a means of pooling health risks and health resources in order to protect members' income against unpredictable health costs but also in order to guarantee their access to health care. Problems of unregulated health insurance markets, like adverse selection and risk selection, are frequently discussed in academic and political circles in the context of either inefficiency or inequity. Though interest in regulation as a health sector reform instrument is growing, empirical studies of unregulated health insurance markets are still rare, particularly, in low and middle-income country settings. This thesis contributes to the body of research and literature that attempts to identify empirical evidence for adverse selection and risk selection. It aims to examine the following research question: Are unregulated health insurance markets characterised by adverse selection and/ or risk selection and do they thereby create inefficiency or inequity. The objective is to demonstrate empirically whether or not these markets experience selection processes. First, this thesis derives a group method for empirical investigations into adverse selection and risk selection from which testable hypotheses can be derived. Second, this method is applied to case study data from a middle-income country. Longitudinal panel data is analysed, describing South Africa's health insurance market of medical schemes in the context of its post-deregulation experience over the four-year period 1995-1998, after premia risk-rating was legalised. The interpretation of the empirical results leads to three main findings. First, intense competition in the contested health insurance market causes favourable risk selection of low risks into and out of medical scheme plans. Second, unfavourable selection by medical scheme plans in the form of dumping high risks can be concluded. Third, there is no evidence for adverse selection and the typical adverse selection cycle cannot be observed. Exploring the policy relevance of the results, it is concluded that the effects of less health insurance regulation, in the context of middle-income country health sector reforms, conflicts with the common health policy objective of equity. More competition and efficiency comes at the price of less equity in health care access for the poor and sick, confirming the known efficiency-equity trade-off.

Item Type:	Thesis (PhD)
Uncontrolled Keywords:	Health Sciences, Health Care Management
Sets:	Collections > ProQuest Etheses Departments > Social Policy
URI:	http://etheses.lse.ac.uk/id/eprint/2307

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