Testing for Asymmetric Information in China's Public Health Insurance Scheme

Three public health insurance schemes were launched in China to provide universal health coverage. Besides the mandatory UEBMI, the URBMI and NRCMS have voluntary enrollment. NRCMS and URBMI took 7 and 3 years respectively to reach near-universal coverage. Using the positive correlation test, we observe direct evidence of adverse selection within the market. We proceed to use the “Unused Observable Test” and found that because of “income” and “sleep adequacy”, a lifestyle-related behavior that we interpret to be a variable that may cause individuals to perceive themselves as “healthy”, thus causing them to resist enrollment. Therefore, policy designers must be sensitive toward the opportunity cost of the poorest in the economy if they are keen to enact a uniform premium yearly.