Research in Progress (RIP): "Can private insurers fail to cream-skim the public option? Evidence from the individual mandate in Germany."



Maria Polyakova, Health Research and Policy

Date and Time

May 27, 2015 4:00 PM - 5:00 PM

Please note: All research in progress seminars are off-the-record. Any information about methodology and/or results are embargoed until publication.


Conventional wisdom suggests that if private health insurance plans compete alongside a public option, they may endanger the latter's financial stability by cream-skimming good risks. Documenting cream-skimming in dual insurance systems is challenging because of the co-existence of selection and moral hazard. I use a fuzzy regression discontinuity design based on exogenous variation in the propensity of choosing private health insurance to address this challenge. The empirical setting is Germany, where there exists an unsubsidized non-group for-profit private health insurance market in parallel to a statutory alternative. Federal regulation mandates individuals with income below an annually set threshold to enroll into the statutory system. I do not find compelling support for concerns of cream-skimming by private insurers. Using a discrete choice model of demand for private insurance, I explore heterogeneous preferences and long-term contract design of private insurers as potential explanations for this optimistic result about insurance design.