Demand and Selection Effects in Supplemental Health Insurance in Germany

This paper empirically assesses selection effects and determinants of the demand for supplemental health insurance that covers hospital and dental benefits in Germany. Our representative data set provides doctor-diagnosed indicators of the individual’s health status, risk attitude, demand for medical services and insurance purchases in other lines of insurance, as well as rich demographic and socio-economic information. Controlling for a wide range of individual preferences, we find evidence that individuals aged 65 and younger with hospital coverage are sicker than those without. In addition, insurance propensity and income are the most important drivers of the demand for supplemental hospital and dental coverage.