Income and the Demand for Complementary Health Insurance in France

Abstract

This paper examines the demand for complementary health insurance (CHI) in the non-group market in France and the reasons why the near poor seem price insensitive. First we develop a theoretical model based on a simple tradeoff between two goods: CHI and a composite good reflecting all other consumptions. Then we estimate a model of CHI consumption and empirically test the impact of potential determinants of demand for coverage: risk aversion, asymmetrical information, non-expected utility, the demand for quality and health, and supply-side factors such as price discrimination. We interpret our empirical findings in terms of crossed price and income elasticity of the demand for CHI. Last, we use these estimates of elasticity to simulate the effect of various levels of price subsidies on the demand for CHI among those with incomes around the poverty level in France. We find that the main motivation for purchasing CHI in France is protection against the financial risk associated with co-payments in the public health insurance scheme. We also observe a strong income effect suggesting that affordability might be an important determinant. Our simulations indicate that no policy of price subsidy can significantly increase the take-up of CHI among the near poor; any increase in the level of subsidy generates a windfall benefit for richer households.Demand for health insurance, Uninsured, Premium subsidies