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How Private Health Insurance Affects Health Behaviour

Moral hazard in insurance


HSE researchers have discovered that the terms and conditions of purchasing private health insurance (PHI) can impact the person’s attitude to their health. If PHI is bought at the client’s own expense, they are inclined to be more careful about their health, when compared to those whose medical insurance is part of an employer’s benefits package.

Private health insurance market

Private health insurance (PHI) first appeared in Russia in 1991, and until 2004, its share was growing rapidly. This was related to the emergence of insurance companies and private clinics. On average, between 9 and 11.4 million PHI contracts are signed annually. This means that about 6 to 8% of the country’s population use private medical insurance.

Corporations are the key buyers of PHI. They sign 95% of contracts in Moscow and St. Petersburg. It is advantageous for insurers to work with organizations, since this decreases the risk of so-called adverse selection.  

Adverse selection means signing a PHI contract with a client whose condition is unknown and who potentially may need expensive medical services and treatment. As a rule, those who buy PHI individually at their own expense do this beforehand, expecting high future costs for health care.

For organizations, PHI purchase can lead to tax benefits and help cover costs for staff medical check-ups.

Moral hazard

Moral hazard or client’s negligence to their own health is considered as one of the key insurers’ ex post risks in the private health insurance market. Andrey Aistov and Ekaterina Alexandrova, researchers at the HSE International Centre for Health Economics, Management, and Policy in St. Petersburg, found out whether such behavior is typical for holders of PHI policies in Russia.

To measure moral hazard levels, the researchers considered doctor visits, tobacco and alcohol consumption, physical exercises, and self-assessed health (SAH) in three groups of respondents.

RLMS-HSE data (2000–2015) was used for empirical estimations. The total number of respondents was over 211,000 (121,000 women and 90,000 men). The first group (203,800) consisted of those who have no private medical insurance. The second group (1,000) were those who had bought insurance at their own expense. The third group (6,400) consisted of corporate medical insurance policy holders.

Gender specifics

Statistical analysis has shown that women pay for medical insurance more often than men (16.5% vs 10.9%). In addition, they visit doctors more often, regardless of whether they have private medical insurance or not. One of the reasons for this is that men generally have a higher self-assessment of their health than women.

Notably, women with insurance smoke more than those who don’t have cover, no matter whether they pay for the policy themselves or have it provided by their employer. However, there is a trend that when women get insurance, they start smoking less.

Men who buy medical insurance start to exercise more. There is no such effect in women.

Private health insurance effects

The research has revealed a difference in the behavior of those who bought the policy themselves and those who received it from the employer. In both cases, the number of visits to a doctor increased. However, those who had paid for insurance themselves start caring about their health more. This is probably thanks to the fact that doctors draw their attention to diet, exercising etc. As a result, they start exercising more and consume less tobacco and alcohol. This means their self-assessed health improves and they start to feel better. This demonstrates a positive effect of private health insurance.

At the same time, those respondents who use a corporate health policy demonstrate decreasing self-assessed health and signs of moral hazard. In particular, those with insurance start consuming more alcohol. The reasons for such behavior should be studied in a separate research. However, Ekaterina Alexandrova, co-author of this study, explained this phenomenon with clients’ possible reaction to the diagnoses they get, taking into account that when they have a policy, people tend to visit doctors more often.


Authors of the study
Andrey Aistov, Associate Professor, Research Fellow at HSE St.Petersburg School of Economics and Management International Centre for Health Economics, Management, and Policy
Ekaterina Aleksandrova, Associate Professor, Director of HSE St.Petersburg School of Economics and Management International Centre for Health Economics, Management, and Policy
Author: Alena Tarasova, February 21, 2019