Journal of Political Economy Vol. 133 No. 6 2025

German Long-Term Health Insurance: Theory Meets Evidence

Juan Pablo Atal¹; Hanming Fang¹; Martin Karlsson²; Nicolas R. Ziebarth³

¹ National Bureau of Economic Research · ² University of Duisburg-Essen · ³ Centre for European Economic Research

Abstract

German long-term health insurance (GLTHI) represents the largest market for private long-term health insurance contracts in the world. We show that GLTHI’s contract design coincides with the optimal dynamic contract for individuals with constant lifetime income profiles. After estimating the key ingredients of a life-cycle model, we find that, under a variety of assumptions, GLTHI achieves welfare that is at most 4% lower than for the optimal contract. Relative to the gains of replacing short-term contracts with either of the two long-term contracts, this welfare gap is smallest when reclassification risk is high.

DOI

10.1086/734781

Volume

133

Issue

6

Pages

1840-1885

Language

en

Sources

openalex crossref bibtex:phds-export.bib

Cite

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