Adverse selection in private health insurance. The structure and evolution of healthcare expenditure in Greece

ABSTRACT

The present article attempts to analyze the concept of adverse selection in private health insurance, the causes for its occurrence, as well as its effects. Reference is also made to the ways in which insurance companies try to deal with the phenomenon of adverse selection. The main conclusion that emerges is that adverse selection may have a significant impact on the insurance market, causing its destabilization, but also indirectly leading to the manipulation of health insurance plans, in order to discourage patients from insurance.

In order to understand the effect of adverse selection in the private health insurance market, it is important to analyze the evolution and structure of health expenditure, especially private, and the reasons behind the low participation in the overall health expenditure.

Thus, an attempt is made to depict and analyze the evolution and structure of health expenditure in Greece from 2009 until today. The main conclusions, in addition to the sharp downward trend in total health expenditure, both as a whole and as a percentage of GDP, relate to the particularly high out-of-pocket private health expenditures leading to impoverishment of Greek households, as well as the increase in the share and volume of private insurance expenditures, which demonstrates the tendency of substitution of reduced public expenditure by private insurance.

Keywords: Adverse selection, private insurance, structure of health expenditure, financing of health expenditure, out of pocket payments