Insurance Plan Choice Research Articles

The impact of terminating cost-sharing reductions payments on health insurance plan choices.

The Trump administration terminated cost-sharing reductions (CSRs) payments to health insurers in 2017, while still required insurers to provide CSRs to eligible enrollees in the Marketplace. Marketplace administration data reveals that, in response to this termination, insurers raised premiums to compensate for their loss. Consequently, premium increases led to more advanced premium tax credits for enrollees in the Marketplace. To investigate the impact of CSRs payment termination on low-income consumer insurance plan choices, I leverage variations in state price regulations and employed a difference-in-differences design. In a robustness analysis, I utilized differences in county income distributions to examine the effects of the termination on insurance choices. The results indicate that after the termination, more low-income enrollees opted for cheaper bronze plans, and fewer chose silver plans. These results suggest that alterations in subsidy channels may inadvertently encourage low-income individuals to purchase less expensive health insurance plans, highlighting an unintended consequence of the termination of cost-sharing subsidies.

How You Pay Drives What You Choose: Health Savings Accounts Versus Cash in Health Insurance Plan Choice

How You Pay Drives What You Choose: Health Savings Accounts Versus Cash in Health Insurance Plan Choice

"It's just not easy to understand": A mixed methods study of health insurance literacy and insurance plan decision-making in cancer survivors.

Understanding cancer survivors' health insurance decision-making is needed to improve insurance choice, potentially resulting in reduced financial hardship. This explanatory mixed methods study assessed health insurance decision-making in cancer survivors. Health Insurance Literacy Measure (HILM) captured HIL. Quantitative eye-tracking data collected from two simulated health insurance plan choice sets gauged dwell time (seconds), or interest, in benefits. Dwell time differences by HIL were estimated using adjusted linear models. Qualitative interviews explored survivors' insurance decision-making choices. Cancer survivors (N = 80; 38% breast cancer) had a median age of 43 at diagnosis (IQR 34-52). When comparing traditional and high-deductible health plans, survivors were most interested in drug costs (median dwell time 58 s, IQR 34-109). When comparing health maintenance organization and preferred provider organization plans, survivors were most interested in test/imaging costs (40s, IQR 14-67). Survivors with low versus high HIL had more interest in deductible (β = 19 s, 95% CI 2-38) and hospitalization costs (β = 14 s, 95% CI 1-27) in adjusted models. Survivors with low versus high HIL more often ranked out-of-pocket (OOP) maximums and coinsurance as the most important and confusing benefits, respectively. Interviews (n = 20) revealed survivors felt alone "to do their own research" about insurance choices. OOP maximums were cited as the deciding factor since it is "how much money is going to be taken out of my pocket." Coinsurance was considered "rather than a benefit, it's a hindrance." Interventions to aid in health insurance understanding and choice are needed to optimize plan choice and potentially reduce cancer-related financial hardship.

“It’s just not easy to understand”: Health insurance literacy and insurance plan decision-making among cancer survivors.

16 Background: Little is known about how cancer survivors choose health insurance plans and whether low health insurance literacy (HIL) may lead to inadequate coverage or high out-of-pocket (OOP) costs. Methods: This prospective, explanatory mixed methods study assessed health insurance decision-making in a sample of adult cancer survivors < 5 years from diagnosis. Quantitative eye-tracking data were collected from two simulated health insurance plan choice sets to gauge interest in plan benefits (measured by dwell time, or seconds of no eye movement; longer dwell time indicates more interest). Ranking of the most important and confusing plan benefit, HIL (HIL Measure; scored 20-84, higher scores indicate higher HIL), and sociodemographic data were also captured. Differences in benefit-specific dwell time by HIL were estimated using adjusted linear models. Qualitative, semi-structured interviews clarified a subset of survivors’ health insurance plan decision-making. Content analysis identified emergent patterns and themes. Results: With a median HIL score of 60 (IQR 50-70), survivors (N = 80) were 65% female, 59% non-Hispanic White, and a median age of 43 at diagnosis (IQR 34-52). Breast cancer diagnoses were most common (38%) and most survivors had received surgery (75%), radiation (55%), or systemic therapy (75%). In the choice set comparing a traditional and high-deductible health plan, survivors were most interested in prescription drug costs (median dwell time 58s, IQR 34-109), but no differences in interest were found comparing survivors with high and low HIL in adjusted models. In the choice set comparing a health maintenance organization and preferred provider organization plan, survivors were most interested in test and imaging costs (40s, IQR 14-67), with survivors with low vs. high HIL having more interest in deductible (β = 19s, 95% CI 2-38) and hospitalization costs (β = 14s, 95% CI 1-27) in adjusted models. Survivors with low vs. high HIL more often ranked low OOP maximums as the most important benefit (53% vs. 38%) and coinsurance as most confusing (68% vs. 53%). Interviews (n = 20) revealed survivors felt alone “ to do their own research” about insurance choices. OOP maximums were cited as the deciding factor since it’s “how much money is going to be taken out of my pocket.” Coinsurance was referred to “rather than a benefit, it's a hindrance.” Opinions about specialist gatekeeping were mixed; some survivors valued the accompanying lower OOP costs, while others worried about care delays. Survivors also reported issues with coverage and cost transparency post-insurance decision. Conclusions: Benefit considerations in health insurance decisions are varied and confusing for cancer survivors with both high and low HIL. Interventions to aid in health insurance understanding and choice are needed to optimize plan choice and prevent cancer-related financial hardship.

The information behaviour of individuals changing health insurance plans and an exploration of health insurance priorities

This study investigated why individuals change their health insurance plans, factors that influence their health insurance plan choices and information sources used to compare and select their desired plans. Semi-structured interviews and card sorting exercises with state university employees in the Midwest region were performed. Saving money was the main reason for switching health insurance plans. Health insurance plan coverage and cost, past experiences with the plans and coverage, health saving accounts, personal and/or family health status and forecasting health care demands for the upcoming year determined their choice of health insurance plan. Human Resource departments, printed materials, health insurance companies, online tools for comparing plans and interpersonal communications were the primary information sources for comparing and selecting health insurance plans. The study suggests that although individuals evaluate various factors and refer to multiple information sources when choosing a plan, they still experience uncertainty regarding selected plans for the coming year.

Semiparametric estimation for average causal effects using propensity score-based spline

When estimating the average causal effect in observational studies, researchers have to tackle both self-selection of treatment and outcome modeling. This is difficult because the parametric form of the outcome model is often unknown and there exists a large number of covariates. In this work, we present a semiparametric strategy for estimating the average causal effect by regressing on the propensity score. Furthermore, we show that regression error terms usually depend on the propensity score as well, which could cause heteroscedastic variances, and thus construct a refined estimator to improve the estimation efficiency. Both estimators are shown to be consistent and asymptotically normally distributed, with the latter one having a smaller asymptotic variance. The simulation studies indicate that our methods compare favorably with many competing estimators. Our methods are easy to implement and avoid hazardous impact due to extreme weights as often seen in weighting estimators. They can also be extended to handle subgroup effects with known structure. We apply the proposed methods to data from the Ohio Medicaid Assessment Survey 2012, estimating the effect of having health insurance on self-reported health status for a population with subsidized insurance plan choices under the Affordable Care Act.

How Do Health, Care Services Consumption and Lifestyle Factors Affect the Choice of Health Insurance Plans in Switzerland?

In compulsory health insurance in Switzerland, policyholders can choose two main features, the level of deductible and the type of plan. Deductibles can be chosen among six levels, which range from CHF 300 to 2500. While the coverage and benefits are identical, insurers offer several plans where policyholders must first call a medical hotline, consult their family doctor, or visit a doctor from a defined network. The main benefit of higher deductibles and insurance plans with limitations is lower premiums. The insureds’ decisions to opt for a specific cover depend on observed and unobserved characteristics. The aim of this research is to understand the correlation between insurance plan choices and lifestyle through the state of health and medical care consumption in the setting of Swiss mandatory health insurance. To do so, we account for individual health and medical health care consumption as unobserved variables employing structural equation modeling. Our empirical analysis is based on data from the Swiss Health Survey wherein lifestyle factors like the body mass index, diet, physical activity, and commuting mode are available. From the 9301 recorded observations, we find a positive relationship between having a “healthy” lifestyle, a low consumption of doctors’ services, and choosing a high deductible, as well as an insurance plan with restrictions. Conversely, higher health care services’ usage triggers the choice of lower deductibles and standard insurance plans.

Messaging, monetary incentives, and participation in wellness programs

PurposeMany companies in the USA have corporate wellness programs but are having trouble encouraging employees to take part in these programs. Even with monetary incentives, many employees do not join. The purpose of this paper is to consider whether timely reminders combined with monetary incentives improve participation in health benefit programs.Design/methodology/approachEmployees of a large manufacturing company across multiple facilities were encouraged to enroll in a messaging service. Once a week, members received an SMS or e-mail reminder to complete a Health Risk Assessment (HRA) and Health Action Plan (HAP). The authors segmented employees based on prior year health insurance plan choice and HRA participation to analyze current HRA and HAP completion, with and without intervention.FindingsThe intervention increased completion rates 6 percent for subgroups that completed the HRA in the prior year and 34–37 percent for those that did not.Practical implicationsCorporate wellness programs should develop good communication channels with employees. The effectiveness of such programs will depend also on employee engagement.Originality/valueWith better communication, companies could raise participation in corporate wellness programmes and potentially reduce some of the monetary incentives that they currently offer.

Box 12, IRS W-2, to the Rescue: The Effect of Transferring Pre-Tax Employer-Sponsored Health Insurance Funds to Employees On After-Tax Income, Federal Income and Payroll Taxes, Health Insurance Premiums, and Health Care Costs

Current tax law prevents workers from trading pre-tax employer-sponsored insurance (ESI) premiums for greater after-tax take-home income. Many workers thus may pay for health plans that are more expensive or have different features from plans they would directly choose for themselves. The tax subsidization of ESI also likely leads to excessive spending on health care because it lowers its costs relative to other non tax-subsidized goods and services. Some propose limiting or eliminating this employer-based health insurance tax exemption for these reasons; its regressivity; and its drain of potential tax revenues. Because of the long history and popular support for ESI, we consider these proposals as practically and politically infeasible. Instead, we simulate the financial results of expanding employee choice and ability to control costs within the traditional structure of ESI by allowing employees, either through Health Reimbursement Accounts (HRAs) or other tax-free mechanisms, to receive their employers’ premium contribution directly and then purchase health insurance themselves from a larger number of health plans than those currently offered to them. The minimal choice in most current ESI plans may force enrollees into plans that do not reflect their preferences and thus imposes an allocative cost. Some empirical research indicates that enrollees would welcome expansion in their choice of plans and that it yields beneficial financial results. Other research, however, indicates that choice overload leads to sub-optimal selection results. It is likely that differences in the educational and transparency support resources partially explain these conflicting results. In our simulation, employees could deduct for income tax purposes the amount used for insurance and, if they spend less than the amount transferred, adjusted for a cross-subsidization holdback from lower-cost employees to higher-cost ones, take the remainder as taxed income. The simulation indicates that annual after-tax household income would have grown by $101–$252 billion and federal tax revenues increased by $39–$163 billion, depending on the concentration of risk in the ESI pool. Lower- and middle-income households gained proportionately more income than higher income ones. The greater take-up of slimmed down policies leads to reduced net spending in the health care delivery system, which, because of the large size of the ESI enrollee pool, would likely spill over to governmental health care programs. These results are based on three specific assumptions about the concentration of risk in the corporate pool and complete ESI implementation of our proposal. Research about the impact of reduced coverage insurance policies generally indicates that they are significantly lower priced. As for health status, the nation’s largest social science experiment, conducted primarily in the 1970s, found that reduced coverage had no impact except for low-income people who are currently covered by Medicaid and the Affordable Care Act. However, subsequent analysis revealed that reduced coverage affected the use of preventive care, even if it was fully insured. Harnessing consumer choice requires a fully transparent and informative ESI system. Informed employee insurance selections require an adequate choice of reasonable insurance plans, disclosure by employers of their contributions, how much employee take-home wages are reduced to pay for ESI, the actuarial value of the plans, and how those employee contributions and actuarial values compare to peer firms and change over time. This enhanced disclosure will likely cause an increase in plan choice. Instructional and navigational support also appear to be key to effective choice of insurance plans.

A Comparison Between Subjective and Objective Methods of Predicting Health Care Expenses to Support Consumers' Health Insurance Plan Choice.

Objective. Numerous electronic tools help consumers select health insurance plans based on their estimated health care utilization. However, the best way to personalize these tools is unknown. The purpose of this study was to compare two common methods of personalizing health insurance plan displays: 1) quantitative healthcare utilization predictions using nationally representative Medical Expenditure Panel Survey (MEPS) data and 2) subjective-health status predictions. We also explored their relations to self-reported health care utilization. Methods. Secondary data analysis was conducted with responses from 327 adults under age 65 considering health insurance enrollment in the Affordable Care Act (ACA) marketplace. Participants were asked to report their subjective health, health conditions, and demographic information. MEPS data were used to estimate predicted annual expenditures based on age, gender, and reported health conditions. Self-reported health care utilization was obtained for 120 participants at a 1-year follow-up. Results. MEPS-based predictions and subjective-health status were related (P < 0.0001). However, MEPS-predicted ranges within subjective-health categories were large. Subjective health was a less reliable predictor of expenses among older adults (age × subjective health, P = 0.04). Neither significantly related to subsequent self-reported health care utilization (P = 0.18, P = 0.92, respectively). Conclusions. Because MEPS data are nationally representative, they may approximate utilization better than subjective health, particularly among older adults. However, approximating health care utilization is difficult, especially among newly insured. Findings have implications for health insurance decision support tools that personalize plan displays based on cost estimates.

Do individuals respond to cost-sharing subsidies in their selections of marketplace health insurance plans?

The Affordable Care Act (ACA) provides assistance to low-income consumers through both premium subsidies and cost-sharing reductions (CSRs). Low-income consumers’ lack of health insurance literacy or information regarding CSRs may lead them to not take-up CSR benefits for which they are eligible. We use administrative data from 2014 to 2016 on roughly 22 million health insurance plan choices of low-income individuals enrolled in ACA Marketplace coverage to assess whether they behave in a manner consistent with being aware of the availability of CSRs. We take advantage of discontinuous changes in the schedule of CSR benefits to show that consumers are highly sensitive to the value of CSRs when selecting insurance plans and that a very low percentage select dominated plans. These findings suggest that CSR subsidies are salient to consumers and that the program is well designed to account for any lack of health insurance literacy among the low-income population it serves.

Taking the hassle out of wellness: Do peers and health matter?

Despite substantial financial incentives provided by the Affordable Care Act and employers, employee enrollment in wellness programs is low. This paper studies enrollment in a wellness program offered along an employer-provided health insurance plan. Two factors are considered in the choice of health plan with wellness: the effect of peer choices and family health on plan choice. Using exclusively obtained data of health insurance plan choice and utilization, this paper compares similar plans and focuses on a subsample of new employees. Result show that peers affect own choice of health insurance: a 10 percentage point rise in the share of colleagues enrolled in Aetna Wellness increases the probability of own enrollment in the plan by up to 3.9 percentage points. This result suggests that lack of experience with a wellness program are key to employee reluctance to enroll. Health effect on probability of enrollment in Aetna Wellness ranges from a 3 percentage point decline to a 3 percentage point rise depending on the measure, suggesting that while wellness programs appeal to low- to medium-intensity users of medical services, they do not appeal to individuals with more severe medical conditions which might benefit most from better coordinated medical care.

PS1-16: Effect of Insurance Plan Choice on Utilization in Kaiser Permanente Colorado

Background/Aims There has been a shift in recent years from traditional HMO-type insurance products to high deductible or co-insurance plans. Kaiser Permanente Colorado (KPCO) has also added new service areas to the region that include Southern and Northern Colorado. In addition, the impending Affordable Care Act will be implemented in 2014 which may bring new and different members to KPCO. There is a need to describe socio-demographic and clinical characteristics by plan type in order to understand how members within these different plan types utilize KPCO resources and what data are available and identifiable within our source data systems. These answers will enable us to establish appropriate inclusion and exclusion criteria for future research studies.

Federal Employees Health Program Experiences Lack Of Competition In Some Areas, Raising Cost Concerns For Exchange Plans

The Affordable Care Act calls for creation of health insurance exchanges designed to provide private health insurance plan choices. The Federal Employees Health Benefits Program is a national model that to some extent resembles the planned exchanges. Both offer plans at the state level but are also overseen by the federal government. We examined the availability of plans and enrollment levels in the Federal Employees Health Benefits Program throughout the United States in 2010. We found that although plans were widely available, enrollment was concentrated in plans owned by just a few organizations, typically Blue Cross/Blue Shield plans. Enrollment was more concentrated in rural areas, which may reflect historical patterns of enrollment or lack of provider networks. Average biweekly premiums for an individual were lowest ($58.48) in counties where competition was extremely high, rising to $65.13 where competition was extremely low. To make certain that coverage sold through exchanges is affordable, policy makers may need to pay attention to areas where there is little plan competition and take steps through risk-adjustment policies or other measures to narrow differences in premiums and out-of-pocket expenses for consumers.

Comparing treatments via the propensity score: stratification or modeling?

In observational studies of treatments or interventions, propensity score (PS) adjustment is often useful for controlling bias in estimation of treatment effects. Regression on PS is used most often and can be highly efficient, but it can lead to biased results when model assumptions are violated. The validity of stratification on PS depends on fewer model assumptions, but this approach is less efficient than regression adjustment when the regression assumptions hold. To investigate these issues, we compare stratification and regression adjustments in a Monte Carlo simulation study. We consider two stratification approaches: equal frequency strata and an approach that attempts to choose strata that minimize the mean squared error (MSE) of the treatment effect estimate. The regression approach that we consider is a Generalized Additive Model (GAM) that estimates treatment effect controlling for a potentially nonlinear association between PS and outcome. We find that under a wide range of plausible data generating distributions the GAM approach outperforms stratification in treatment effect estimation with respect to bias, variance, and thereby MSE. We illustrate each approach in an analysis of insurance plan choice and its relation to satisfaction with asthma care.

Time is money: Outpatient waiting times and health insurance choices of elderly veterans in the United States

Growth in the number of days between an appointment request and the actual appointment reduces demand. Although such waiting times are relatively low in the US, current policy initiatives could cause them to increase. We estimate multiple-equation models of physician utilization and insurance plan choice for Medicare-eligible veterans. We find that a 10% increase in VA waiting times increases demand for Medigap insurance by 5%, implying that a representative patient would be indifferent between waiting an average of 5 more days for VA appointments and paying $300 more in annual premium.

The Rhetoric and the Reality of Health Care Reform Legislation

A plethora of political autopsies have been performed on the Clinton Administration's failed health care reform of 1994 - it was too much; it was too late; there was too much pandering; there was too little pandering. Such critiques of this complex undertaking are at least partially correct. It was probably hubris to believe that such a comprehensive health care reform package could be proposed and passed in a single year. But much of the instant analysis of its failure has repeated the rhetoric of the debate rather than stepping back and placing the events of 1994 in perspective. Here I focus on five areas where rhetoric confused the debate, and compare them with the underlying realities of health care reform: (1) Financing. Proponents of the Administration proposal argued that universal coverage could be achieved primarily by redirecting existing revenue flows. It offered almost no new revenue sources - aside from a sin tax on tobacco. The reality is that to achieve universal coverage, we all have to pay for it, either directly or indirectly. And indirect payments can cause serious problems. (2) Controlling Costs. In an attempt to make cost containment efforts seem less onerous on individuals, the rhetoric offered two somewhat contradictory strategies of imposing *price controls* on health care providers and introducing market reforms, called *managed competition*. Presumably, managed competition would also automatically eliminate fraud, waste, and abuse, and in some unspecified way painlessly discipline the market for health care. The reality is that people must face difficult choices if we are to control the costs of health care. Cost containment is a much more controversial issue than the Administration admitted. Many persons are nervous about the impacts of such controls. (3) Choice. The Administration went out of its way to promise choice, often in ways that complicated the plan. Opponents countered that the Administration's plan would actually limit choice. But what did they mean by choice? If they meant choice of doctors and hospitals, or choice of insurance plans, the Administration's plan stacked up very well. But the right to choose any kind of health care at any time would have been restricted under the Clinton proposal. Moreover, choice has long been eroding for most Americans as employers and insurance companies have imposed more control on insurance. In this case, the rhetoric of the opponents won out over the reality of what is already happening in our health care system. (4) Incremental Reform. Opponents of the Administration's proposal claimed that successful health care reform could be achieved by tinkering around the edges, keeping what was right about the health care system and getting rid of what was wrong. The reality is that changes in one area of health care provision affect other areas, in ways that are not always understood or anticipated, and there is little consensus on what should be kept and what should be changed under an incremental approach. (5) Nostalgia. Many of those who opposed health care reform altogether expressed a longing to return to a health care system that they remember and think still exists, but that probably hasn't been in place for the last decade. Their warning that we should not surrender what we have for something less was given more credence than the Administration and other reformers realized. The reality is that health care has already changed rapidly and will continue to change with or without health care reform legislation. The Clinton Administration assumed that Americans understood the current status of national health care, including its flaws, and assumed this meant they had a mandate for change.

DO HMO PLANS REDUCE HEALTH CARE EXPENDITURE IN THE PRIVATE SECTOR?

I. INTRODUCTION Since the HMO Act was passed in 1973, health maintenance organizations (HMOs) have become one of the most popular types of managed care plans in the U.S. health delivery system. Faced with a dramatic increase in health care costs, HMOs are designed to implement a tight utilization review and authorization process, along with restricted choice of providers, as a means of managing utilization and quality. By comparing health care expenditure patterns of HMO members with those of non-HMO members among the privately insured, nonelderly population, this study seeks to understand the impact that HMOs have on health care expenditure in the private insurance sector. Our data come from the 2000 Medical Expenditure Panel Survey (MEPS), a nationally representative survey of the U.S. civilian, noninstitutionalized population. Despite the dramatic growth in the number and proportion of individuals enrolled in private HMO plans, much of existing research on this issue has focused on the relationship between HMO enrollment and use of health care services (Miller and Luft 1994, 2002), whereas only a limited number of studies have been conducted on the role of prevalent HMO enrollment in saving health care expenditure (Kralewski et al. 2000). Analyses on expenditure performance are mostly carried out on the performance of the Medicaid or Medicare managed care plans (Buchanan et al. 1996; Mello et al. 2002). This study extends previous research in several ways. First, rather than using localized or insurance, group-wise data (Johnson and Aquilina 1986; Kralewski et al. 2000; McLaughlin et al. 1983; McLaughlin 1987; Robinson 1996) or employer data (Baker and Corts 1996; Feldman et al. 1993), we use data provided directly by HMO members through nationally representative surveys. Second, by using decomposed expenditure data, we are able to ascertain whether the provision of financial incentives to both consumers and providers in HMO plans makes any differences in medical care expenditure by each party, compared with traditional plans. Furthermore, by testing the hypothesis of selectivity in health insurance choice, we try to avoid the biased findings that often find in favor of HMO plans. Trends and Relevance During the past two decades, the number of HMO enrollees has proliferated from 9.1 million (4% of the total population) in 1980 to 76.1 million (26.4%) in 2001 (Health, United States 2003). Between 1977 and 2001, the percentage of the U.S. population under age 65 that joined private insurance HMOs increased dramatically from 3.7% to 27.9% (Table 1). Over the same time period, per capita national health expenditure increased from $1,980 to $4,773 (in 1995 constant dollars), and total national health expenditure as a percentage of gross domestic product rose from 8.8% to 14.1%. Out of total national health expenditure, the share of private expenditure decreased from 57.3% to 54.1%. Motivated by the prevalence of HMOs in the private insurance market and the insufficiency in understanding its cost containment performance, we investigate the patterns of health care expenditure among HMO members to understand whether HMOs contribute to limiting medical expenditure relative to non-HMO arrangement. There are two main complications to our empirical analysis. The first is selection bias due to endogenous health plan choice decisions. Previous studies (Buchanan and Cretin 1986; Jackson-Beeck and Kleinman 1983) suggest that the utilization reduction effect of HMOs may be a consequence of the selective enrollment of a healthier population in HMO plans, rather than the more efficient medical care delivery management of HMOs. Thus, we first estimate the probit model of health insurance plan choice decisions and test this hypothesis in line with the analysis of Taylor et al. (1995). The second complication is that the dependent variables are nonnegative with a high frequency of zero observations. …

Bayesian analysis of the two‐part model with endogeneity: application to health care expenditure

AbstractThis paper studies the effect of managed care on medical expenditure using a model in which the insurance status is assumed to be endogenous. Insurance plan choice is modeled through the multinomial probit model. The medical expenditure variable, the outcome of interest, has a significant proportion of zeros that are handled using the two‐part model, extended to handle endogenous insurance. The estimation approach is Bayesian, based on the Gibbs Sampler. The model is applied to a sample of 20 460 individuals obtained from the Medical Expenditure Panel Survey. The results provide substantial evidence of selectivity. Copyright © 2006 John Wiley &amp; Sons, Ltd.

Subsidization and Choice in the Group Health Insurance Market

AbstractThis study investigates the effect of group health insurance plan choice on insurance unit price. The empirical findings suggest that the unit price of insurance, as measured by the ratio of the premium to expected indemnity benefits, is lower in group plans that offer employees a choice of different insurance options and require a premium contribution than it is in plans lacking at least one of these two features. The analyses suggest that lower unit prices are related to an increase in indemnity benefits and that the reduction in the unit price is greater for lower risks. The findings indicate that although subsidization of high risks by low risks occurs with group health insurance, the degree of subsidization is less when employees are offered a choice of health insurance plans.