Determinants of employment-based private health insurance coverage in Denmark

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1 Nordc Journal of Health Economcs Onlne ISSN: Determnants of employment-based prvate health nsurance coverage n Denmark ASTRID KIIL* Unversty of Southern Denmark Abstract: Ths study estmates the determnants of havng employment-based prvate health nsurance (EPHI) based on data from a survey of the Dansh workforce conducted n The study contrbutes to the lterature by explorng the role of satsfacton wth the tax-fnanced health care system as a potental determnant of EPHI ownershp and by takng nto account that some employees receve EPHI free of charge, whle others pay the premum out of ther pre-tax ncome and thus make an actual choce. The results ndcate that the probablty of havng EPHI s postvely affected by prvate sector employment, sze of the workplace, whether the workplace has a health scheme, ncome, beng employed as a whte-collar worker, and age untl the age of 49, whle the presence of subordnates, gender, educaton level, membershp of 'denmark' and lvng n the captal regon are not sgnfcantly assocated wth EPHI coverage. As expected, the characterstcs related to the workplace are by far the quanttatvely most mportant determnants. The assocaton between EPHI and self-assessed health s found to be quadratc such that ndvduals n good self-assessed health are more lkely to be covered by EPHI than those n excellent and far, poor or very poor self-assessed health, respectvely. Fnally, the probablty of havng EPHI s found to be negatvely related to the level of satsfacton wth the tax-fnanced health care system. The fndngs of the study are not affected notably by dstngushng emprcally between employees who receve EPHI free of charge and those who pay the premum out of ther pre-tax ncome. Keywords: Duplcate health nsurance; Determnants; Inequty n access; Health care satsfacton; Denmark 1 Introducton In several European countres wth unversal tax-fnanced health care systems, such as the Unted Kngdom, Span, and the Scandnavan countres, consderable parts of the populatons now have prvate health nsurance that covers treatment at prvate facltes (Aarbu, 2010; Mossalos and Thomson, 2002). Hence, the analyss of ths type of prvate health nsurance s of both theoretcal and polcy relevance. Prvate health nsurance that covers treatment at prvate facltes for treatment that s also avalable free of charge at publc hosptals may be classfed as duplcate vs-a-vs the unversal system. The man perceved benefts are faster access to care, greater freedom of choce, and n some cases also better amentes (Colombo and Tapay, 2004; OECD, 2004).

2 30 Nordc Journal of Health Economcs As revewed by Propper and Green (2001), prvate fundng n publc health care systems may have several possble consequences. On the one hand, duplcate prvate health nsurance may be thought of as accommodatng dfferences n preferences, and t allows for greater freedom of choce than would be feasble n a purely tax-fnanced system wth only publc hosptals. Moreover, t may releve the pressure on the publc system and reduce the watng tmes for treatment at publc facltes, whch n turn may decrease sckness absence to the extent that ths s assocated wth watng tme for treatment. On the other hand, the man arguments aganst prvate health nsurance are that t may cause nequty n the access to medcal care and possbly also ncrease the total medcal spendng due to moral hazard and dynamc effects on wages n the health care sector. In the longer run, ncreasng relance on prvate health nsurance may also brng about reduced support for the unversal health care system, thereby possbly worsenng the access to health care for the ndvduals who rely exclusvely on ths. Whle the determnants of ndvdually purchased duplcate prvate health nsurance have been studed extensvely n the lterature, emprcal evdence on what characterses the group of ndvduals wth polces that are purchased through and typcally also pad by ther employer s confned to a few studes. 1 Ths paper contrbutes to the growng lterature on employment-based prvate health nsurance (EPHI) n unversal tax-fnanced health care systems based on a recently collected dataset from Denmark. The share of the occupatonally actve Dansh populaton wth EPHI has ncreased steadly durng the past decade. Followng legslaton enacted n 2002 that tax-exempted employees for the ncome value of EPHI condtonal on the nsurance beng offered to all employees n the company, the share wth EPHI has gone from 5 percent to 32 percent of the employed n 2009 (Statstcs Denmark, 2010; The Dansh Insurance Assocaton, 2010). The purpose of the tax-exempton was to make t more attractve for employers to assume a socal responsblty and to mprove the overall welfare by reducng watng tmes for treatment at publc facltes and decreasng sckness absence. In addton, t was hoped that makng the tax-exempton contngent on the nsurance beng offered to all employees n the company would nduce a more equal dstrbuton of EPHI wthn the companes (The Dansh parlament, 2002). 2 Premums are ether fully pad by the employers or (for about 26 percent of the nsured based on the data used n ths paper) deducted from the pre-tax ncome of the employees. The EPHI contracts avalable n the Dansh market prmarly cover dagnostcs and electve surgery at prvate facltes for treatments that are also avalable at publc hosptals, but often wth some watng tme (The Dansh Insurance Assocaton, 2010). Hence, as noted above, they may be classfed as prmarly duplcate n relaton to the tax-fnanced health care system. 1 Emprcal studes of the determnants of ndvdually purchased prvate health nsurance nclude, but are not lmted to, Besley et al. (1999), Costa and Garca (2003), Harmon and Nolan (2001), Jofre-Bonet (2000), Kng and Mossalos (2005), Olvella and Vera-Hernández (2006), Propper (1989), Propper et al. (2001), and Rodríguez and Stoyanova (2008). Emprcal studes of the determnants of employment-based prvate health nsurance are confned to Aarbu (2010), Besley et al. (1999), Bræmer (2008), Grepperud and Iversen (2011), Kng and Mossalos (2005), Kjellberg et al. (2010), and Sem et al. (2007). These studes are revewed n secton 4. 2 The condton that the nsurance should be offered to all employees n a company n order to qualfy for the tax-exempton was not ncluded n the ntal bll, but added durng the readngs of the bll (The Dansh parlament, 2002).

3 Determnants of employment-based prvate health nsurance coverage n Denmark 31 The dstrbutonal consequences of EPHI may be assessed based on the prncple of horzontal equty n the access to health care, whch mples equal access to treatment for ndvduals n equal need. The condton that the nsurance should be offered to all employees n a company n order to qualfy for the tax-exempton may well be expected to elmnate horzontal nequty wthn companes. Defnng horzontal nequty as any dfferences, EPHI generates horzontal nequty n the access to health care between those n the workforce holdng EPHI and those not holdng EPHI by defnton, by allowng ndvduals wth the same need for health care to dffer n ther access to treatment dependng on nsurance status. However, another frequently used approach s to consder horzontal nequty as dfferences n access or use that vary systematcally wth socodemographc determnants. Followng ths approach, there s nequty n the access to health care when access vares systematcally wth socodemographc determnants; whle randomly dstrbuted dfferences do not by themselves mply nequty. Regardless of whch approach s used, the presence of EPHI generates horzontal nequty between the workforce and students, pensoners, and unemployed, who do not have EPHI through ther workplace by defnton. Theoretcally, nsurance status s the outcome of a decson process encompassng the choce of employer, the decsons of the employer to employ the employee and to offer prvate health nsurance, and n some cases also the decson of the employee to accept or reject ths offer. When nsurance premums are fully pad by employers, the nsurance status of the employees s predomnantly determned by the decson of the employer to offer EPHI. On the contrary, when the premum s deducted from the pre-tax ncome of the employees, they face an actual choce and may reject the nsurance offer. 3 Hence, the decson framework as well as the determnants may well dffer dependng on whether the nsurance premum s fully pad by the employer or deducted from the pre-tax ncome of the employee. The am of ths paper s to estmate the determnants of EPHI coverage wthn the Dansh workforce. Gven the expectaton from poltcal sde that makng the taxexempton contngent on the nsurance beng offered to all employees would nduce an equal dstrbuton of EPHI coverage wthn companes, and preferably also reduce the mportance of socoeconomc determnants n the dstrbuton of EPHI wthn the workforce, knowledge on the resultng determnants of EPHI s hghly relevant for Dansh polcy-makers. The paper contrbutes to the nternatonal lterature n two ways. For one thng, t s the frst study to explore the role of satsfacton wth the tax-fnanced health care system as a potental determnant of EPHI coverage. From a theoretcal pont of vew, companes and employees who are unsatsfed wth the publc system may reasonably be expected ascrbe greater value to duplcate prvate health nsurance. Secondly, t s explored whether the man results change when takng nto account that some employees receve the nsurance free of charge, whle others pay the premum out of ther pre-tax ncome, thus also makng a choce at the ndvdual level. To the best knowledge of the author, ths study s the frst to make such dstncton, whch may be crucal gven that the decson framework dffers for the two cases. 3 A telephone survey of HR-staff n several larger companes offerng EPHI whch s pad for by the employees by havng the premum deducted from ther pre-tax ncome confrmed that n ths case EPHI s always presented as an optonal choce and the employees are requred to make an actve choce. Hence, t may reasonably be expected that the employees do perceve that they face an actual choce and may reject the offer n ths case.

4 32 Nordc Journal of Health Economcs The paper s organsed as follows. Secton 2 descrbes the development of EPHI and ts nsttutonal settng n Denmark. Secton 3 accounts for the theoretcal framework of the decson process that leads to EPHI coverage. The purpose of ths secton s not to develop new theory, but to provde an overvew of the exstng framework. Secton 4 summarzes the emprcal knowledge about the determnants of EPHI n unversal health care systems. Secton 5 descrbes the data used n the emprcal analyss, accounts for expected assocatons between explanatory varables and EPHI coverage, and provdes some descrptve evdence. Secton 6 accounts for the econometrc specfcaton. The results are reported n secton 7. Secton 8 dscusses possble nterpretatons and mplcatons of the results as well as the lmtatons of the study. Secton 9 concludes. 2 Insttutonal settng The Dansh health care system s a comprehensve tax-fnanced system wth unversal access. General practtoner and specalst vsts, out-patent ambulatory care as well as hosptalsatons are free at the pont of use for all ctzens. General practtoners act as gatekeepers n the sense that n most cases a referral from a general practtoner s needed to be able to access more specalsed treatment. Copayment and watng tme are frequently used to raton the use of health care servces for whch demand s prce or tme senstve. There s consderable prvate copayment for adult dental care, prescrpton medcaton, physcal therapy, chropractc care, and psychologcal counsellng (Strandberg-Larsen et al., 2007). Prvate copayment accounted for about 14 percent of total health expendtures n 2009 (OECD, 2009). For other types of treatment, manly electve surgery, there may be watng tme for treatment at publc hosptals. Ths has attracted consderable publc and poltcal attenton over tme (Madsen, 2010). The EPHI polces avalable n the Dansh market are suppled by commercal nsurance companes. The exact benefts dffer slghtly between nsurance companes, just lke polces are often talored to specfc frms. EPHI s manly offered n the prvate sector. As prevously mentoned, the EPHI contracts avalable n the Dansh market prmarly cover dagnostcs and electve surgery at prvate facltes for treatments that are also avalable at publc hosptals, but often wth some watng tme. 4 In addton, EPHI s ncreasngly used to fnance health care servces for whch prvate copayment s common n the publc sector, such as physotherapy, chropractc care, and psychologcal counsellng (The Dansh Insurance Assocaton, 2010). In 2009, the total gross compensatons pad out by the commercal nsurers were dstrbuted as follows: 67 percent covered operatons and the lke, 9 percent covered psychologst consultatons, 17 percent covered physotherapy, chropractc care and the lke, and 7 percent covered other servces (The Dansh Insurance Assocaton, 2010). Gross compensatons from prvate health nsurance (ndvdually purchased and employment-based) make up 1.6 percent of the total Dansh health expendture (OECD, 2010). As prevously mentoned, premums are ether pad by employers or (for about 26 percent of the nsured based on the data used n ths paper) deducted from the pre-tax ncome of the employees. The premum for fully employer pad nsurance s not, lke the value of many frnge benefts, subject to ncome tax when nsurance s offered to all 4 However, gven that hosptal watng tmes have declned n recent years among other thngs due to the ntroducton of free hosptal choce (Kjellberg et al., 2010), some commentators mght argue that duplcate EPHI n fact does not mply qucker access to hosptal care anymore (thanks to an anonymous revewer for pontng ths out).

5 Determnants of employment-based prvate health nsurance coverage n Denmark 33 employees n a company. 5 Ths mples an ndrect tax subsdy of about percent of the premum dependng on the taxable ncome of the employee. The annual premum per employee vares dependng on the beneft scheme and the sze of the workplace. Larger companes generally pay a smaller premum per employee because the scope for rsk poolng ncreases wth company sze. There s no rsk ratng of premums wthn companes due to the condtons of the tax-exempton; t s, however, lkely to occur between companes. The average premum per person has been constant around DKK 1000/EUR 134 snce 2003, but ncreased to DKK 1428/EUR 191 n 2009 (The Dansh Insurance Assocaton, 2010). 6 Whle t s possble that screenng of frms occurs, nsurance elgblty wthn the frm s usually not condtonal on health status. However, there may be a deferred perod for treatment of exstng condtons and lmtatons on the annual number of consultatons wth physotherapsts, chropractors, and psychologsts. Moreover, prvate nsurance patents are subject to gate keepng gven that coverage s contngent on havng a documented need for treatment (The Dansh parlament, 2002). For prvate hosptal treatment, need s typcally documented by obtanng a referral from a general practtoner. Duplcate prvate health nsurance can also be purchased from the commercal nsurance companes on an ndvdual bass. The benefts are roughly the same as for the employment-based contracts, but premums are not subject to specal tax treatment and are rsk rated based on age. Exstng condtons are usually excluded from coverage. Accordng to ndustry numbers, approxmately 100,000 ndvduals had taken out prvate health nsurance through a commercal nsurance company on an ndvdual bass n 2009 (The Dansh Insurance Assocaton, 2010). In addton to EPHI, some employers also have company health schemes n place, whch provde preventon and treatment of work-nduced njures, typcally wth physotherapy, chropractc care, massage, and reflexology. The health schemes dffer from EPHI n the sense that they do not provde any type of electve surgery at prvate facltes, and that they treat only work-nduced njures. Fnally, more than two mllon Danes (approxmately 42 percent of the adult populaton) have taken out prvate health nsurance through the non-proft mutual nsurance company denmark n 2009 (Health Insurance denmark, 2009). Ths type of prvate health nsurance s manly complementary to the tax-fnanced health care system n that t prmarly covers copayments for treatment n the publc health care system. Approxmately 25 percent of the members of denmark are also partly rembursed for electve surgery at prvate hosptals (accordng to nternal materal from denmark ). Despte some overlap n the coverage between the ndvdually purchased and employment-based nsurance contracts, some ndvduals hold both. In the sample descrbed n secton 5.1, 23 percent of the respondents are covered by both EPHI and denmark. One obvous reason for ths s that employees are not very lkely to reject an offer of practcally free EPHI even though they are already covered through denmark. Another possble and lkely reason s that the EPHI contracts usually expre when the 5 The legslatve framework opens up for that companes may dfferentate somewhat n the health benefts offered to ther employees based on senorty and number of workng hours and mantan the tax exempton (Dansh Tax and Customs Assocaton, 2005). Ths opton s, however, not lkely to be wdely used due to the admnstratve costs of ths. 6 The fgures are calculated as total premum ncome of the commercal nsurers dvded by the number of nsured. Converson from DKK to EUR s undertaken usng the March 2011 average exchange rate of (Danske Bank, 2011).

6 34 Nordc Journal of Health Economcs nsurance holder changes job or retres, whle nsurance through denmark s lfe-long wth a fxed premum. Moreover, the EPHI polces do not cover copayment for some treatments provded wthn the tax-fnanced health care system, such as adult dental care and prescrpton drugs, whch are the most mportant benefts covered by denmark. The determnants of membershp of denmark are not subject to analyss n ths paper; ts exstence s, however, taken nto account when analysng determnants of EPHI. 3 Theoretcal framework The nsurance status of an employee s the outcome of a decson process encompassng the ndvdual s choce of employer, the decson of the employer to employ the employee and to offer EPHI, and n some cases also the decson of the employee to accept or reject the offer. Whle EPHI has been found to have mportant mplcatons for labour market choces n the US (Curre and Madran, 1999), t s not expected to notably affect labour market choces n Denmark, where the value of EPHI makes up a neglgble small share of the total compensaton package. 7 Hence, ths part of the decson process s not consdered n the followng. Moreover, the theoretcal lterature on prvate health nsurance n general and EPHI n partcular manly takes ts pont of departure n the US health care system, where EPHI provdes the prmary source of coverage for all health care (.e. both acute and electve) for the workng age populaton. Ths must be kept n mnd when applyng the theores outlned n the followng to settngs where prvate nsurance provded through the workplace prmarly covers electve surgery at prvate hosptals and clncs for treatments that are also avalable at publc hosptals. When nsurance premums are fully pad by employers and tax-exempted, the nsurance status of the employees s predomnantly determned by the decson of the employer to offer EPHI. Secton 3.1 dscusses varous approaches to modellng employer provson of prvate health nsurance. The addtonal consderatons when employees pay all or part the premum out of ther pre-tax ncome, thus also facng a choce at the ndvdual level, are accounted for n secton The decson of employers to offer duplcate prvate health nsurance Employer behavour as regards the provson of health nsurance s surprsngly lttle explored n economcs, and the theoretcal lterature s charactersed by several dfferent angles of approaches rather than a unfed approach (Curre and Madran, 1999). Regardless whch theoretcal approach s taken, employers may have a cost advantage over prvate ndvduals n the provson of health nsurance gven that group purchase has the potental to reduce adverse selecton and lower admnstratve expenses through poolng (Gruber, 2000). The benefts from rsk poolng mply that larger companes are expected to be relatvely more lkely to offer EPHI. In addton, the preferental tax treatment of EPHI whch s found n some countres, ncludng Denmark, may dstort the preferences for the composton of the compensaton package n favour of EPHI. The employers decson to offer EPHI may be analysed wthn the theoretcal framework of compensatng wage dfferentals for frnge beneft provson (Curre and Madran, 1999). Ths framework consders EPHI as part of the total compensaton package, whch may be used by companes to attract and retan labour. Wthn ths framework, frms are assumed to mnmse ther total labour costs, subject to mantanng the employees utlty at the level requred to keep the frm compettve n the labour 7 The value of EPHI makes up less than 0.5 percent of the average money wages for the permanently employed n Denmark (Statstcs Denmark, 2009b; The Dansh Insurance Assocaton, 2010).

7 Determnants of employment-based prvate health nsurance coverage n Denmark 35 market (Feldman et al., 1997). Hence, the employers decson to offer health nsurance depends on the prce at whch they can purchase t n the market and the preferences of current as well as potental employees. Another approach to modellng employer provson of EPHI s to assume that the decson s made by aggregatng employee preferences, ether wthn frms or through unon barganng (Goldsten and Pauly, 1976). A common crtque of ths approach s that t s debatable how closely the mechansm used to determne the employers provson of PHI resembles actual decson makng processes wthn companes. In partcular, the assumpton that unons arbtrarly decde on the employers provson of PHI has been argued to be unrealstc. Consderng the employers demand for EPHI n a smlar way as the ndvdual demand, t may be argued that employers demand duplcate EPHI n order to protect themselves aganst the rsk mposed by sckness absence, assumng that people get back to work qucker wth EPHI. One mplcaton of ths s that companes usng more specalsed labour, whch s usually hghly pad and hard to replace n the case of llness, are more lkely to nvest n the health of ther employees by takng out duplcate EPHI, agan assumng that EPHI reduces sckness absence. Along a smlar lne, Grepperud and Iversen (2011) argued that provded that premums are not rsk rated, companes wth a large share of employees n bad health and those operatng n ndustres exposed to consderable health rsks may be relatvely more nclned to purchase EPHI,.e. adverse selecton at the company level. Fnally, Boln et al. (2002) extended the health captal approach of Grossman (1972) to nclude employers and found that they may also have an nterest n nvestng n the health of ther employees, gven that employees who are off work sck are costly n terms of sckness benefts and lost labour. The margnal beneft of an nvestment n health s shown to depend on the technology used n the employer s producton,.e. whether t s labour or captal ntensve, as well as government regulaton. Moreover, n an uncertan world, rsk averse employers are predcted to make larger nvestments n the health of ther employees (e.g. by provdng EPHI) than they would n a perfectly certan world. 3.2 The employees demand for duplcate prvate health nsurance In stuatons where employees are facng an actual choce, several factors may affect the decson to accept an offer of EPHI. For one thng, the demand for prvate health nsurance has been shown to ncrease wth the degree of rsk averson under symmetrc nformaton (Cutler and Zeckhauser, 2000). When asymmetrc nformaton s present, economc theory predcts that ndvduals may select themselves nto prvate health nsurance, ether adversely based on ther probablty of fallng ll (Rothschld and Stgltz, 1976) or advantageously based on ther probablty of fallng ll and ther rsk preferences (de Meza and Webb, 2001; Hemenway, 1990). The fndng of adverse selecton has been replcated for prvate health nsurance that exsts alongsde a unversal health care system by Olvella and Vera-Hernández (2006). However, the potental for selecton at the ndvdual level s reduced consderably for group based polces, and n regulatory settngs such as the Dansh, where EPHI s usually offered to all employees n a company or members of a trade unon and premums are tax-exempted. Theoretcal contrbutons that specfcally modelled the demand for duplcate coverage have shown that ndvduals select themselves nto ths type of nsurance by ncome (Besley et al., 1999), and emphaszed the mportance of the geographcal accessblty of prvate facltes and the relatve qualty of care delvered by the taxfnanced and the prvate health care sectors, respectvely (Propper et al., 2001). The

8 36 Nordc Journal of Health Economcs selecton on ncome mples that f employers take nto account the preferences of ther employees n decdng whether to offer EPHI, companes wth hghly pad employees wll be more lkely to nclude duplcate EPHI n the compensaton package. Another motve for takng out prvate health nsurance s n order to gan access to health care that would otherwse be unaffordable (Nyman, 1999). In unversal health care systems where treatment s typcal free at the pont of demand and hence there s no fnancal loss assocated wth llness, the access motve may be nterpreted as ganng quck access to treatment (Jones et al., 2006). 4 Prevous emprcal fndngs Ths secton s restrcted to consder studes of the determnants of EPHI n nsttutonal settngs that are somewhat smlar to the Dansh n the sense that EPHI duplcates the coverage provded by a unversal health care system. The data, partcular focus, and econometrc methods of the revewed studes are accounted for n Appendx A. Emprcal evdence on the employers decson to take out duplcate EPHI on behalf of ther employees n unversal health care systems s sparse; only one study based on company-level data from Norway was dentfed. Ths study by Sem et al. (2007) found the probablty of companes purchasng EPHI to some or all of ther employees to be ncreasng wth company sze and proft, the share of younger employees, the educaton level of the staff of employees, and operatng n ndustres exposed to consderable health rsks (such as buldng and constructon, farmng, forestry, and mnng). The predomnant part of the emprcal lterature s based on ndvdual-level data, and the analyses were n all cases restrcted to the populatons of occupatonally actve ndvduals. Overall, t s noted that the majorty of the emprcal lterature s based on a rather sparse theoretcal framework. The fndngs of the varous studes are accounted for by area as follows: 1) Socodemographc characterstcs, 2) health, 3) nteractons wth the state of the unversal health care system, and 4) tax ncentves. Consderng frst the mportance of socodemographc determnants, the probablty of EPHI ownershp has consstently been found to ncrease wth ncome. Lkewse, males are generally found to be more lkely to have EPHI than females (Aarbu, 2010; Besley et al., 1999; Bræmer, 2008; Grepperud and Iversen, 2011; Kng and Mossalos, 2005). The effect of age on the probablty of havng EPHI has been found to be postve untl a gven pont and negatve or nsgnfcant thereafter n the Unted Kngdom and parts of t (Besley et al., 1999; Kng and Mossalos, 2005) and negatve n Norway (Aarbu, 2010; Grepperud and Iversen, 2011). 8 For educaton level, the emprcal evdence s mxed. Studes from the Unted Kngdom found a postve assocaton between educaton level and the probablty of havng EPHI (Besley et al., 1999; Kng and Mossalos, 2005). Lkewse, descrptve evdence from Denmark ndcated that the prvately nsured a better educated (Bræmer, 2008). On the contrary, Aarbu (2010) and Grepperud and Iversen (2011) found a negatve assocaton between hgher educaton and EPHI coverage n Norway. However, addtonal analyss of the Norwegan data by Grepperud and Iversen (2011) revealed that the negatve effect of educaton and the postve effect of beng male lost ther sgnfcance when dummes for sector of employment were ncluded as explanatory varables. Regardng the mportance of occupaton, self-employed and publc employees were generally found to be less lkely to 8 Ths ndvdual-level fndng from Norway corresponds well wth the prevously dscussed company-level result of Sem et al. (2007) that companes wth a larger share of younger employees are more lkely to offer EPHI.

9 Determnants of employment-based prvate health nsurance coverage n Denmark 37 be nsured through ther workplace, whle the opposte appled to prvate sector employees, professonals, and ndvduals n manageral postons (Besley et al., 1999; Grepperud and Iversen, 2011; Kng and Mossalos, 2005). Fnally, Kng and Mossalos (2005) found centre-rght voters to be more lkely to have EPHI n England. The emprcal evdence on the assocaton between EPHI and health s ambguous. Kjellberg et al. (2010) found that those n good or very good self-assessed health were relatvely more lkely to have EPHI n Denmark. On the contrary, dummy varables for good or very self-assessed health were largely nsgnfcant n studes from England and Norway (Grepperud and Iversen, 2011; Kng and Mossalos, 2005), as was the presence of at least one chronc condton (Grepperud and Iversen, 2011). Moreover, Grepperud and Iversen (2011) found contacts wth general practtoners and hosptalsatons to be negatvely and postvely assocated wth the probablty of havng EPHI, respectvely. The postve relatonshp between hosptalsatons and EPHI ownershp may be consstent wth adverse selecton nto EPHI as well as moral hazard. Fnally, Kng and Mossalos (2005) found a negatve effect of smokng on the probablty of havng EPHI n England, whle Aarbu (2010) found the opposte based on data from Norway. Consderng potental nteractons between the state of the unversal health care system and EPHI coverage, Besley et al. (1999) found the prevalence of prvate health nsurance to be ncreasng wth the regonal long term watng tmes for treatment at publc hosptals n the Unted Kngdom, although the relatonshp was much weaker for EPHI than for ndvdually purchased polces. Along a smlar lne, Kng and Mossalos (2005) found that regonal outpatent watng tmes and the supply of prvate surgeons were mportant determnants of EPHI ownershp n England. Among the Scandnavan countres, Aarbu (2010) found no sgnfcant relatonshp between regonal watng lsts and the prevalence of EPHI coverage n Norway. Fnally, Rodríguez and Stoyanova (2008) found that a shft n tax ncentves whch mplctly ncreased the prce of ndvdually purchased nsurance and reduced the prce of EPHI n Span reduced the prevalence of the former and ncreased the prevalence of EPHI, as expected. 5 Data The emprcal analyss s based on a cross-sectonal sample of the Dansh populaton aged Ths dataset contans the most detaled nformaton on prvate health nsurance coverage avalable to date. The data were collected n June 2009 usng an nternet-based questonnare. The plot-tested fnal questonnare was e-maled to a sample of 13,246 respondents va YouGov Zapera s Denmark panel. 9 In total 5,447 respondents answered the questonnare, whch corresponds to a response rate of 41 percent. The sample s representatve wth respect to age, gender, and the regon of resdence, whle ndvduals wth only basc schoolng or vocatonal tranng are somewhat underrepresented n the data. The questonnare and the data collecton process, ncludng further analyses of non-response and representatvty, are fully documented n Kl and Pedersen (2009). In 9 YouGov Zapera s Denmark panel s an actvely managed nternet-based panel contanng members n Denmark as of July The YouGov Zapera Denmark panel meets the Esomar nternatonal code on marketng and socal research practce. Ths mples among other thngs that ts members are recruted through a wde selecton of channels n order to ensure an approprate demographc balance, and that panel members must log on wth a password when partcpatng n surveys n order to ensure that the ntended person completes the survey (YouGov Zapera Ltd., 2009).

10 38 Nordc Journal of Health Economcs the followng, the varables measurng prvate health nsurance coverage are descrbed n detal n secton 5.1, the selecton of explanatory varables and ther expected assocatons wth EPHI coverage are accounted for n secton 5.2, and secton 5.3 presents some descrptve evdence for the explanatory varables by EPHI status. 5.1 Prvate health nsurance coverage The questonnare ncluded a seres of questons on prvate health nsurance coverage. Frst, the respondents were brefly ntroduced to the concept of prvate health nsurance. Employed respondents were asked whether they were covered by prvate health nsurance through ther employer; and those who answered affrmatvely were asked whether the employer pad the entre premum. Marred and cohabtng respondents were asked whether they had a prvate health nsurance through ther partner s employer. Fnally, all respondents were asked whether they had taken out prvate health nsurance elsewhere (not countng membershp of denmark ). Indvduals who do not know ther nsurance status are dropped from the data, reducng the sample sze from 5,447 to 5,031 ndvduals. Table 1 shows the dstrbuton of the prvate health nsurance suppled by commercal nsurance companes n Denmark for the total sample and for the subsample of employed. Table 1 Source of prvate health nsurance coverage for the total sample of the Dansh populaton aged and the subsample of employed, 2009 Source of coverage All a (n = 5,031) Employed a (n = 3,206) Prvately nsured through commercal nsurance company Indvdually purchased 5.98% (n = 301) 6.86% (n = 220) Through own employer (EPHI) b 25.04% (n = 1,260) 38.15% (n = 1,223) Through partner s employer 5.29% (n = 266) 6.74% (n = 216) Not nsured 66.96% (n = 3,369) 52.78% (n = 1,692) a Percentages add up to more than 100 percent n the columns because some ndvduals have prvate health nsurance coverage through more than one source. b The group of 37 ndvduals (1,260-1,223=37) who are not classfed as employed but nevertheless have EPHI through ther employer s made up of 12 apprentces or tranees, 15 full tme students, 7 ndvduals on long term sck leave, and 3 ndvduals reportng to have an occupaton other than the optons avalable n the questonnare. It s evdent from Table 1 that the prmary source of prvate health nsurance coverage s through one s own employer. Moreover, the percentage wth nsurance coverage s seen to be hgher for the occupatonally actve part of the populaton for all nsurance types. The sample s restrcted to the subsample of occupatonally actve for the purpose of ths study, because ndvduals outsde the labour force do not have prvate health nsurance through ther workplace by defnton. Ths reduces the sample sze from 5,031 to 3,206 ndvduals. In addton, the 216 ndvduals wth prvate health nsurance through ther partner s employer and the 220 ndvduals who have purchased prvate health nsurance from a commercal nsurance company on an ndvdual bass are excluded from the prmary analyss based on the followng consderatons. The ndvduals who are

11 Determnants of employment-based prvate health nsurance coverage n Denmark 39 covered through ther partner s employer are excluded because the characterstcs of the employer offerng the nsurance are not dentfed n the data. Hence, the determnants of ths type of prvate health nsurance cannot be meanngfully estmated and nterpreted. The ndvduals wth ndvdually purchased prvate health nsurance are excluded because even though these polces largely cover the same as the employment-based polces, the decson process that leads to ths type of prvate health nsurance coverage can reasonably be expected to dffer markedly from the decson process that leads to EPHI coverage. Moreover, the number of ndvduals wth ndvdually purchased prvate health nsurance s stll modest. 10 The resultng dataset ncludes 2,813 ndvduals. 5.2 Hypotheses Ths secton dentfes the potental determnants of EPHI coverage and forms some hypotheses based on the theoretcal framework and prevous emprcal fndngs, takng nto account the partcular nsttutonal features that are present n the Dansh health care system. The drawng up of hypotheses s ntended to gude the selecton of explanatory varables from the nformaton avalable n the data and provde some benchmark aganst whch to dscuss the results. Table 2 provdes an overvew of the potental determnants and accounts for a pror expectatons regardng ther relatonshp wth EPHI coverage. As accounted for n secton 3, the theoretcal lterature suggests that employerrelated characterstcs are mportant determnants of EPHI coverage, gven that the ntal decson to take out prvate health nsurance s ntated at the company-level. Ths study ncludes sector of employment, employer sze, and whether the ndvdual has any subordnates as potental determnants. 11 The presence of subordnates s not expected to affect the probablty of havng EPHI n Denmark, gven that the condton for the taxexempton dscourages companes from offerng prvate health nsurance to management level employees only. 10 An exploratory analyss of the determnants of havng purchased prvate health nsurance from a commercal nsurance company on an ndvdual bass revealed only very few statstcally sgnfcant assocatons. 11 Gven the major mportance of the employers n offerng EPHI n the frst place, t would be desrable to nclude more employer-related characterstcs n the analyss, such as the average age, sckness absence, and educaton level of the staff of employees n the company n whch an ndvdual s employed, as well as the work envronment, human resource polces, etc. However, ths nformaton s not avalable n the data, and t cannot be obtaned from Statstcs Denmark and lnked due to the absence of socal securty numbers n the data.

12 40 Nordc Journal of Health Economcs Table 2 Hypotheses for potental determnants Varable Expected assocaton wth EPHI coverage Employer-related characterstcs Sector of employment Employer sze Subordnates Socodemographc characterstcs Male Age Personal pre-tax ncome per year Educaton level Occupaton Member of denmark Company health scheme Captal regon Health-related characterstcs Self-assessed health Chronc condtons Atttudnal characterstcs Satsfacton wth tax-fnanced system postve for prvate; negatve for publc postve nsgnfcant postve postve untl a gven pont then negatve postve ambguous postve for whte-collar nsgnfcant ambguous postve ambguous ambguous negatve The hypotheses regardng the socodemographc characterstcs gender, age, ncome, and educaton level are derved from the exstng emprcal lterature. As far as occupatonal status s concerned, the probablty of havng EPHI coverage s expected to be hgher for whte-collar workers than for sklled and unsklled blue-collar workers. Ths expectaton s motvated by the Dansh labour market legslaton, accordng to whch whte-collar workers are enttled to full pay durng sckness, whle ths s not a matter of course for employees who are pad on an hourly bass (as often apples to sklled and unsklled workers). As a consequence, companes wth a large share of whte-collar workers are facng a larger fnancal rsk as regards to the sckness absence of ther employees, and they may thus be expected to attach a greater value to EPHI, causng whte-collar workers to be more lkely to have EPHI. Fnally, lvng n the captal regon s expected to ncrease the probablty of havng EPHI due to a hgher concentraton of knowledge-ntensve enterprses as well as prvate treatment facltes n ths area compared to the rest of the country. Membershp of the non-proft mutual nsurance company denmark s not expected to affect the probablty of havng EPHI, gven that these two nsurance types perform fundamentally dfferent functons n relaton to the tax-fnanced health care system. As for company health schemes, whch dffer from EPHI n the sense that they treat work-nduced njures only and do not provde any type of electve surgery at prvate facltes, the expected assocaton wth EPHI s ambguous. Whle the most lkely relatonshp among the two frnge benefts s that both tend to be offered by the same employers,.e. those who assgn a hgh value to havng healthy employees, t s also possble that employers choose to offer company health schemes nstead of EPHI.

13 Determnants of employment-based prvate health nsurance coverage n Denmark 41 A pror, the relatonshp between EPHI ownershp and health (measured by self-assessed health status and a set of dummy varables ndcatng the presence of eght chronc condtons) s expected to be ambguous, gven the theoretcal framework and the prevous emprcal fndngs accounted for n sectons 3 and 4, respectvely. Contacts to health care provders were not ncluded as explanatory varables gven that these varables may lkely be affected by EPHI coverage and thus endogenous. Moreover, t was decded not to nclude varous health-related behavours, such as smokng, drnkng, and exercsng, as well as self-reported measures of atttude to economc and health-related rsk n the model (even though the nformaton was avalable n the data), snce there are no compellng theoretcal arguments or emprcal evdence n favour of dong so. 12 Fnally, the lnk between the state of the tax-fnanced system and EPHI coverage s explored by ncludng satsfacton wth the tax-fnanced health care system as an explanatory varable. The assocaton between the level of satsfacton and EPHI ownershp s expected to be stronger for ndvduals who pay the premum out of ther pretax ncome and thus make an actual choce than for those who receve EPHI free of charge. The reason for ncludng satsfacton rather than nformaton on regonal watng tmes or other qualty measures s that the combnaton of free hosptal choce for many electve procedures and low geographcal dstances n Denmark mples that any dfferences n watng tme for treatment between the regons should be levelled out. 5.3 Descrptve evdence Table 3 shows how the characterstcs of the ndvduals are dstrbuted on the explanatory varables for all employed and by EPHI status, and tests for equalty of proportons or means between ndvduals wth and wthout EPHI, respectvely. Ths allows for a frst nspecton of possble dfferences between the groups. Respondents who answered don t know or other than the categores specfed n the questonnare to one or more of the explanatory varables are dropped from the data before commencng the analyss, reducng the sample sze further from 2,813 to 2,536 ndvduals. 13 The man motvaton for ths data restrcton s that t s questonable whether the ndvduals n the don t know and other groups have anythng n common. Moreover, the sgns of potental margnal effects for these categores cannot meanngfully be nterpreted. Due to a partcularly large share of respondents who do not wsh to dsclose ther personal pre-tax ncome, a dummy varable s ncluded that equals one whenever respondents do not wsh to dsclose ther ncome and zero otherwse. 14 As evdent from Table 3, the resultng dataset ncludes 2,536 ndvduals, of whom 42 percent are covered by prvate health nsurance through ther employer. Wthn the group of ndvduals wth EPHI, 71 percent receves the nsurance free of charge, 26 percent pays the premum themselves out of ther pre-tax ncome, and 3 percent do not 12 It was checked that ncludng health-related behavours and rsk preferences as explanatory varables dd not affect the results notably, and that the coeffcents for these varables were largely nsgnfcant. These results are avalable from the author upon request. 13 The dropped ndvduals are dstrbuted as follows: 6 dd not know ther sector of employment; 66 dd not know the sze of ther workplace; 17 dd not know ther personal pre-tax ncome; 29 stated to work n a sector other than those specfed n the questonnare; 42 stated to have an educaton other than those specfed n the questonnare; and 123 ndvduals stated to have an occupaton other than those specfed n the questonnare. 14 An alternatve strategy would be to mpute all mssng values.

14 42 Nordc Journal of Health Economcs know how the premum s pad. In other words, the employer pays the entre premum for the majorty of the nsured. Table 3 Dstrbuton on explanatory varables for all employed and by EPHI status All employed EPHI No EPHI Two-sded test for equalty (EPHI vs. no EPHI) % % % z-statstc Employer-related characterstcs Sector of employment Publc company *** Independent publc company Prvate company *** Employer sze 1-9 employees *** employees ** employees employees *** Any subordnates Socodemographc characterstcs Male *** Age, mean *** (std. err.) (0.23) (0.33) (0.31) Personal pre-tax ncome per year (n 1,000s) DKK 0-399/EUR *** DKK /EUR *** DKK 800+/EUR *** Do not wsh to dsclose Educaton level Basc or hgh school Vocatonal *** College ** Occupaton Whte-collar worker *** Sklled worker Unsklled worker Self-employed or assstng spouse *** Member of denmark Company health scheme *** Captal regon *** Health-related characterstcs Self-assessed health status Excellent Good ***

15 Determnants of employment-based prvate health nsurance coverage n Denmark 43 Far, poor or very poor *** Chronc condtons Asthma Allerges * Dabetes Hypertenson * Emphysema Arthrts *** Osteopoross Tnntus Atttudnal characterstcs Satsfacton wth tax-fnanced system Very satsfed *** Predomnantly satsfed * Nether satsfed nor unsatsfed ** Predomnantly unsatsfed * Very unsatsfed N 2,536 1,063 1,473 * denotes sgnfcance at 10 percent level; ** denotes sgnfcance at 5 percent level; *** denotes sgnfcance at 1 percent level. Conversons from DKK to EUR are undertaken usng the March 2011 average exchange rate of (Danske Bank, 2011). The expectatons that EPHI s manly a prvate sector phenomenon and that t s more frequently offered n larger companes are confrmed by Table 3. Lkewse for the socodemographc characterstcs, where the dfferences n the dstrbutons between the group wth EPHI and the group wthout are by and large as expected. One excepton to ths s educaton, where t s seen that EPHI s relatvely more frequent n the group of vocatonally traned, whle the opposte apples to the group of ndvduals wth at least college level educaton. Members of denmark are equally dstrbuted n the two groups. Consderng self-assessed health, ndvduals wth EPHI are overrepresented n the group wth good self assessed health and reversely for the remanng categores, although the dfference s not sgnfcant for the ndvduals n excellent health. Except for arthrts, the prevalence of the chronc condtons does not dffer sgnfcantly between the two groups. As expected, Table 3 reveals a pattern of relatvely more ndvduals who are satsfed wth the tax-fnanced health care system n the group wthout EPHI and the other way around for the group wth EPHI coverage, although the percentage of very unsatsfed ndvduals does not dffer sgnfcantly. 6 Econometrc specfcaton The determnants of havng EPHI altogether, ether fully pad by the employer or deducted from the pre-tax ncome of the employee, are estmated usng a standard bnary probt model. Ths model compares the total group of ndvduals wth EPHI to the group of ndvduals wthout EPHI. Takng nto account that some employees receve EPHI free of charge, whle others pay the premum out of ther pre-tax ncome and thus make an actual choce, the econometrc specfcaton becomes less straght forward. One way to address ths complcaton s by estmatng a bvarate probt model wth sample selecton (Greene,

16 44 Nordc Journal of Health Economcs 1999; Van de Ven et al., 1981). 15 Ths model s somewhat n between a full bvarate probt model and a bvarate probt model wth partal observablty, n the sense that we observe more than n the partal observablty model but less than n the full bvarate probt model. 16 The econometrc specfcaton conssts of two smultaneous equatons: (1) y y * 1 * 2 = X = X 1 β + ε β + ε 2, for = 1,..., N * * where y 1 and y 2 are unobserved latent varables ndcatng an ndvdual s propensty to have EPHI and to have pad the premum, respectvely; X 1 and X 2 denote the vectors of explanatory varables, where the frst varable n each vector s set to unty; β 1 and β 2 are the two vectors of parameters to be estmated; and ε and 1 ε are the random error terms, 2 whch are assumed to follow a standard bvarate normal dstrbuton wth correlaton coeffcent ρ. Assumng that the model s correctly specfed, ρ 0 mples that the processes determnng * * y 1 and y 2 are nterdependent. In the specal case where ρ = 0, the bvarate probt model wth sample selecton s equvalent to estmatng two separate probt models (although of course for the latter model on a restrcted subsample). The * * latent varables, y 1 and y 2, are measured by the two bnary varables, y 1 and y 2, whch are generated by the followng rule: * (2) 1 f y1 > 0 y1 = * 0 f y = 0 1 *, 1 f y2 > 0 y2 = * 0 f y = 0 2 The frst equaton dentfes whether the respondent has EPHI, y 1, and the second equaton dentfes whether the respondent has pad the premum for the EPHI out f ts pre-tax ncome, yy, condtonal on havng EPHI. Selecton occurs because for a gven ndvdual y 2 s only observed when y 1 equals one. In other words, t s only observed whether the ndvdual pays the premum or receves the nsurance for free for the subsample of nsured. For the unnsured, t s not known whether they would have had to pay the premum themselves, had they been nsured. Thus, there are three types of observatons n the sample wth the followng probabltes: y 1 = 1, y2 = 1 Pr( y1 = 1, y2 = 1) = Φ 2 ( X 1 β1, X 2 β 2, ρ) y1 = 1, y2 = 0 Pr( y1 = 1, y2 = 0) = Φ 2 ( X 1 β1, X 2 β 2, ρ) (3) y1 = 0 Pr( y1 = 0) = 1 Φ( X 1 β1 ) 15 Ths approach s preferred over estmatng two separate probt models (.e. one for employees who receve EPHI free of charge and one for those who pay the premum out of ther pre-tax ncome) gven that the error terms of two such equatons may be correlated. 16 Prevous applcatons of ths model nclude among others Bernsky (2004) who examned atttudes towards race ssues n the US and Rodríguez and Stoyanova (2008) who estmated the mpact of a tax reform on the demand for prvate health nsurance n Span. The presentaton of the bvarate probt model wth sample selecton n ths secton follows that of Rodríguez and Stoyanova (2008).

17 Determnants of employment-based prvate health nsurance coverage n Denmark 45 where Φ and Φ 2 are the unvarate and the bvarate standard normal cumulatve dstrbuton functons, respectvely. The frst lne n equaton system (3) models ndvduals who are nsured through ther employer but pay the premum out of ther pretax ncome and thus make an actual choce, the second lne models ndvduals who are nsured free of charge through ther employer, and the thrd lne models ndvduals who do not have any type of prvate health nsurance through ther workplace. The log-lkelhood functon based on these probabltes s: (4) ( X β, X β, ρ) + log Φ ( X β, X, β, ρ) LogL = log Φ y = 1 1 y = log 1 y = ( Φ( X β )) y = 1 1 y = The log-lkelhood functon s maxmsed wth respect to the two vectors of coeffcents, β 1 and β 2, and the correlaton coeffcent ρ. As n several other models nvolvng multple equatons, the magntude and the sgns of the smple coeffcents n the bvarate probt model wth sample selecton can be msleadng. Hence, margnal effects are calculated at the means of the explanatory varables n accordance wth Greene (1996). For contnuous varables, the margnal effects are gven by the dervatves of the probabltes stated n (3) wth respect to the explanatory varable of nterest. For bnary varables, they are computed as the effect of changng the varable from zero to one, holdng all other varables constant. The bvarate probt model wth sample selecton s dentfed through functonal form. However, t s preferable to nclude one or more varables that affect the probablty of havng EPHI, but not whether ths s receved free of charge or pad for, when such varables are avalable n the data. 7 Results Stata/IC 11 was used to estmate the models and compute margnal effects and standard errors. Table 4 reports the results of the bnary probt model whch analyses the determnants of havng EPHI altogether,.e. ether fully pad by the employer or deducted from the pre-tax ncome.

18 46 Nordc Journal of Health Economcs Table 4 Margnal effects from bnary probt model yy = 11 for ndvduals wth EPHI Expected sgn Marg. eff. Std. err. Employer-related characterstcs Sector of employment Publc company (baselne) n/a n/a. Independent publc company *** (0.0435) + Prvate company *** (0.0164) + Employer sze 1-9 employees (baselne) n/a n/a employees *** (0.0408) employees *** (0.0421) employees *** (0.0415) + Any subordnates (0.0304) nsg. Socodemographc characterstcs Male (0.0259) + Age *** (0.0079) + Age *** (0.0001) - Personal ncome (n 1,000s) DKK 0-399/EUR * (0.0294) - DKK /EUR (baselne) n/a n/a DKK 800+/EUR ** (0.0811) + Do not wsh to dsclose (0.0467) nsg. Educaton level Basc or hgh school (baselne) n/a n/a Vocatonal (0.0412) ambg. College (0.0374) ambg. Occupaton Whte-collar worker (baselne) n/a n/a Sklled worker ** (0.0412) - Unsklled worker ** (0.0406) - Self-employed or assstng spouse *** (0.0281) - Member of denmark (0.0238) nsg. Company health scheme *** (0.0270) ambg. Captal regon (0.0255) + Health-related characterstcs Self-assessed health status Excellent ** (0.0306) ambg. Good (baselne) n/a n/a Far, poor or very poor *** (0.0282) ambg. Chronc condtons Asthma (0.0523) ambg. Allerges (0.0293) ambg. Dabetes (0.0664) ambg.

19 Determnants of employment-based prvate health nsurance coverage n Denmark 47 Hypertenson (0.0383) ambg. Emphysema (0.0887) ambg. Arthrts ** (0.0347) ambg. Osteopoross (0.1216) ambg. Tnntus (0.0413) ambg. Atttudnal characterstcs Satsfacton wth tax-fnanced system Very satsfed (baselne) n/a n/a Predomnantly satsfed * (0.0613) + Nether satsfed nor unsatsfed * (0.0643) + Predomnantly unsatsfed ** (0.0662) + Very unsatsfed *** (0.0846) + N 2,536 Log-lkelhood -1, LR χ 2 (df = 34) 1, *** * denotes sgnfcance at 10 percent level; ** denotes sgnfcance at 5 percent level; *** denotes sgnfcance at 1 percent level. n/a s used to denote not applcable. Conversons from DKK to EUR are undertaken usng the March 2011 average exchange rate of (Danske Bank, 2011). As expected, the characterstcs related to the workplace are by far the quanttatvely most mportant determnants of whether or not one has EPHI, except for the presence of subordnates, whch s nsgnfcant. Compared to publc employees, those workng at ndependent publc companes are percentage ponts more lkely to have EPHI and prvate employees are percentage ponts more lkely. Lkewse, the assocaton between employer sze and the probablty of havng EPHI s postve as expected. Consderng the socodemographc characterstcs, the assocaton between age and the probablty of havng EPHI s seen to change at dfferent ponts n the dstrbuton of age. In partcular, an addtonal year of age ncreases the probablty of havng EPHI by 2.97 percentage ponts untl the age of 49, whereafter EPHI prevalence decreases wth age. Indvduals wth an annual pre-tax ncome of DKK 800,000 or more are percentage ponts more lkely to have EPHI compared to ndvduals n the mddle group wth annual ncomes of DKK 400, ,999, whle those who earn less than DKK 400,000 are 4.90 percentage ponts less lkely. Compared to whte-collar workers, sklled and unsklled workers are 9.62 and percentage ponts, respectvely, less lkely to have EPHI, and self-employed or assstng spouses are percentage ponts less lkely. Workng for a company wth a health scheme ncreases the probablty of havng EPHI by percentage ponts. Consderng next the assocaton between EPHI status and health, ndvduals n excellent self-assessed health are seen to be 7.74 percentage ponts less lkely to be covered by EPHI compared to those n good self-assessed health, and ndvduals n far, poor or very poor health are 7.68 percentage ponts less lkely. The dummy varables ndcatng the presence of eght chronc condtons are all nsgnfcant except for arthrts, whch s found to decrease the probablty of havng EPHI by 8.53 percentage ponts. Fnally, t s seen from Table 4 that compared to the group of ndvduals who are very satsfed wth the tax-fnanced health care system, ndvduals who are predomnantly unsatsfed are percentage ponts more lkely to have EPHI and those who are very unsatsfed are percentage ponts more lkely. Ths confrms the hypothess that the

20 48 Nordc Journal of Health Economcs demand for EPHI that covers treatment at prvate facltes for treatments whch are also avalable wthn the unversal tax-fnanced health care system s somehow related to the percepton of the publc alternatve. Table 5 reports the results of the bvarate probt model wth sample selecton. Ths model takes nto account that some employees receve the nsurance free of charge whle others pay the premum out of ther pre-tax ncome by modellng the probablty of havng EPHI altogether and the probablty that t s pad for and thus resultng from an actual choce smultaneously. The 32 ndvduals who do not know who pad the premum for ther EPHI are excluded from the analyss. Table 5 Margnal effects from bvarate probt model wth sample selecton yy 1111 = 11 for ndvduals wth EPHI yy 2222 = 11 for ndvduals who pay the premum Marg. eff. Std. err. Marg. eff. Std. err. Employer-related characterstcs Sector of employment Publc company (baselne) n/a n/a n/a n/a Independent publc company *** (0.0462) (0.2758) Prvate company *** (0.0162) (0.3774) Employer sze 1-9 employees (baselne) n/a n/a n/a n/a employees *** (0.0410) (0.1270) employees *** (0.0424) (0.1809) 250+ employees *** (0.0420) (0.1982) Any subordnates (0.0304) (0.0447) Socodemographc characterstcs Male (0.0259) (0.0374) Age *** (0.0078) (0.0163) Age *** (0.0001) (0.0002) Personal ncome (n 1,000s) DKK 0-399/EUR * (0.0294) (0.0452) DKK /EUR (baselne) n/a n/a n/a n/a DKK 800+/EUR (0.0823) (0.1027) Do not wsh to dsclose (0.0467) (0.0603) Educaton level Basc or hgh school (baselne) n/a n/a n/a n/a Vocatonal (0.0411) (0.0628) College (0.0371) (0.0579) Occupaton Whte-collar worker (baselne) n/a n/a n/a n/a Sklled worker * (0.0408) (0.0698) Unsklled worker * (0.0400) (0.0744) Self-employed or assstng spouse *** (0.0272) (0.1804) Member of denmark (0.0238) (0.0366) Company health scheme *** (0.0274) (0.0942)

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