A perverse 'net' effect? Health insurance and ex-ante moral hazard in Ghana.

Incentive problems in insurance markets are well-established in economic theory. One of these incentive problems is related to reduced prevention efforts following insurance coverage (ex-ante moral hazard). This prediction is yet to be tested empirically with regard to health insurance, as the health domain is often considered relatively immune to perverse incentives, despite its validation in other insurance markets that entail adverse shocks. This paper tests for the presence of ex-ante moral hazard with reference to malaria prevention in Ghana. We investigate whether enrollment in the country's National Health Insurance Scheme (NHIS) negatively affects ownership and use of insecticide-treated bed nets (ITNs). We use a panel of 400 households in the Brong Ahafo region for this purpose and employ a propensity-adjusted household fixed effects model. Our results suggest that ex-ante moral hazard is present, especially when the level of effort and cost required for prevention is high. Implications of perverse incentive effects for the NHIS are briefly outlined.