This research identifies the existence of ex ante moral hazard in Dutch health insurance. Four of the main lifestyle variables associated with the development of non-communicable disease are
investigated empirically. It concerns obesity, physical inactivity, heavy smoking and heavy alcohol consumption. The analysis points out that indeed the propensity of being obese, being a heavy smoker and being a heavy drinker decreases with the uptake of a voluntary deductible. Respectively, the average likeliness of adopting these lifestyle variables decreases with 29.7; 12.16 and 13.25
percentage points when opting for a voluntary deductible, compared to the reference group that goes with the default option of a zero voluntary deductible. A deductible exceeding the obligatory amount indeed suffices as a financial incentive to decrease unhealthy lifestyle adoption. Identification of these effects happens by employing two models on a dataset composed from the Dutch LISS panel. The dataset covers the years 2009-2017, with the exception of 2014. The models employed are a univariate probit and a bivariate probit with the inclusion of instrumental variables. Both models control for individual sources of selection, namely socio-demographic status, risk type and risk preferences. The second model includes the possibility of additional endogeneity from unobserved variables. The two instrumental variables introduced in this second model are the uptake of complementary health insurance and a measure for extreme pessimism. Comparison of the models allows me to conclude that there indeed exists additional endogeneity when considering obesity, heavy smoking and heavy drinking. This research contributes to the scarce empirical evidence on the existence of ex ante moral hazard in health insurance markets and provides an advice for Dutch health insurers and policy makers, concerning an income bounded increase in the supposedly ideal level of consumer deductible.

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