Does Health Insurance Lead to Ex ante Moral Hazard? Evidence from China’s New Rural Cooperative Medical Scheme

  • Xuezheng Qin
  • Tianyi Lu
Original Article


This paper examines whether participating in the New Rural Cooperative Medical Scheme (NRCMS), a publicly subsidised health insurance programme in rural China, encourages individuals to engage in risky health behaviours. Despite its rapidly increasing coverage rate, relatively little attention has been paid to the impact of NRCMS on the lifestyle choices of its enrollees. On the basis of the 2000–2009 longitudinal data from the China Health and Nutrition Survey (CHNS), we find that NRCMS participation has a statistically significant (although quantitatively small) impact on people’s tendency towards smoking, heavy drinking (among males), spending time in sedentary activities, consuming high-calorie food and being overweight. The increase in these unhealthy lifestyles in turn leads to elevated disease risks, indicating that insurance-induced, “ex ante moral hazard” is present in rural China. The findings are robust to the variation in model specification and sample selection, as well as to the introduction of an instrumental variable that controls the endogeneity of insurance participation. Our results provide implications on reforming the pricing and administration practice of China’s largest health insurance campaign and on evaluating public insurance schemes in other developing countries.


ex ante moral hazard New Rural Cooperative Medical Scheme health-related behaviour 



This study is supported by National Natural Science Foundation of China (Grant No. 71103009), Ministry of Education of China (Grant No. 12JZD036), and Beijing Higher Education Young Elite Teacher Project (Grant No. YETP0039). We thank Xiaobo Peng for her contribution to an earlier draft. The authors are responsible for all remaining errors.


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Copyright information

© The International Association for the Study of Insurance Economics 2014

Authors and Affiliations

  • Xuezheng Qin
    • 1
  • Tianyi Lu
    • 1
  1. 1.School of Economics, Peking UniversityBeijingChina

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