Private Health Insurance under Universal Coverage: Balancing Efficiency and Equity

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Paper Joint with Arizo Karimi (Uppsala), Marten Palme (Stockholm University), David Seim (Stockholm University) and Jens Wikstrom (Gothenburg University).

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Abstract:  This paper studies the role of private health insurance (PHI) in Sweden's universal healthcare system, focusing on its impact on equity and efficiency. Using comprehensive administrative data, we uncover a pronounced income gradient in PHI uptake, despite higher health risks among lower-income groups. Exploiting various sources of variation, we show that PHI increases healthcare utilization, both privately funded and publicly funded. It also reduces the private insurance holders’ waiting times in public healthcare through quicker referrals. Leveraging cancer registry data, we also link PHI to improved survival rates following cancer diagnoses. We evaluate the distributional implications of the PHI market, accounting for the congestion and cost externalities on public healthcare and highlighting the potential for targeted policy interventions.