Selection on moral hazard is the tendency to choose an insurance coverage level based on how strongly one's own healthcare use responds to that coverage — the 'slope' of utilisation — rather than on the expected level of health risk alone. A student learns how a two-period utility model predicts that individuals with a higher moral-hazard coefficient rationally buy lower deductibles, and how a Roy-type selection model estimated with local instrumental variables recovers marginal treatment effects across the distribution of unobserved resistance to choosing a coverage level. Applied to a nationally representative mandatory-insurance market, the framework shows that the most self-selecting high-responsiveness types react 25-35 percent more strongly than the average insured person, which matters for how uniform cost-sharing rules are calibrated.
This empirical research paper investigates how individuals with different propensities for healthcare utilization self-select into health insurance plans with varying deductible levels in the Swiss m…