Moral hazard and its implications on health insurance sector – overview of impact of COVID-19 pandemic

Kenneth J. Arrow’s disruptive work, 'Medical Uncertainty and Welfare Economics’, published in 1963, was one of the first studies investigating the effects of moral hazard on the healthcare sector. Since then, countless works exploring that subject have been published. The history of research on moral hazard in medical insurance shows that this concept is defined differently in other areas of the economy than healthcare. Purpose – The proposed work is an attempt to understand and conceptualize the moral hazard in health insurance. As uncommon circumstances marked 2020, we now consider health insurance through the impact of the SARS-CoV-2 pandemic. This work discusses the results of an investigation of the impact of moral hazard and its implications on the health insurance sector during COVID-19. Research method – The author designed and conducted a study that presented several metrics involving the distribution of medical expenditures, the effect of price on medical care consumption, the PLS (profit and loss sharing) concept, and their mediating and moderating effect on moral hazard in the insurance sector. Results – There is a statistically significant and very strong relationship with a positive sign (β = 0.79; p <0.001) between the price effect and the moral hazard. The analyses show also that the price effect coexists statistically with the PLS, and the relationship between these variables is moderately strong and positive (β = 0.79; p <0.001). Originality – Insignificant relationship between the PLS and the moral hazard can be seen while the price is entered into the model (β = 0.03; p = 0.450). The lack of mediation could confirm that the price effect plays a major role in a moral hazard.