Christian Waibel¹ (with Wanda Mimra² and Janina Nemitz³)

1 ETH Zürich, Chair of Risk and Insurance Economics

2 ETH Zürich, Chair of Risk and Insurance Economics

3 UZH Zürich, Department of Economics

Scientific and technological advances increasingly allow for better tailoring of health insurance plans to individual health risk profiles. This development questions the sustainability of health plans that feature strong cross-subsidization across different health risk types. An important observation is that the willingness to cross-subsidize in health plans might depend on whether the risk is uncontrollable by individuals, such as genetic risk, or modifiable via health behaviors. In this paper, we provide the results of an experiment on the willingness to pool genetic risk in health insurance. Subjects’ overall health risk has an assigned, uncontrollable genetic risk part and a behavioral risk part, which can be reduced by costly effort. The experimental variation either includes behavioral risk in the pooling of a group insurance scheme or separates it out. Although we observe social preferences for pooling, we observe only a low level of actual genetic risk pooling across the two experimental conditions. This is due to both large heterogeneity in social preferences for pooling across subjects, and the dynamics of the willingness to pay for group insurance in the different experimental markets. Thus, our results indicate that mandatory pooling might be needed if, under the veil of ignorance, a society nevertheless wishes to pool certain forms of heterogeneous risk exposure, such as genetic risk.