Health Plan Choice Research Articles

Consumer price sensitivity and health plan choice in a regulated competition setting.

We estimate premium elasticities in a regulated competition market based on a quasi-exogenous premium increase for young adults in Switzerland. We exploit that individuals born before the turn of the year ("treatment group") face a larger increase in premiums than individuals born after the turn of the year ("control group"). We find that the treatment group is 1.5 times more likely to switch their health plan than the control group. Overall, individuals respond to premium increases by choosing more frequently health plans with managed care features, increasing the deductible, and by switching the insurer. Regarding health plan choice, we find an average elasticity of -0.56 with regard to the relative premium difference of any plan to the status quo contract. The elasticity is up to 5 times larger for the treated (-1.03) than for the controls (-0.19). Our results are not driven by health status as measured by health care expenditures and chronic conditions. Rather, our findings suggest that the difference in the premium elasticity is driven by the salience of the premium increase. We argue that this finding is of high relevance for health care policies that aim at fostering health plan competition.

Consumer Engagement in Health Care Among Millennials, Baby Boomers, and Generation X: Findings from the 2017 Consumer Engagement in Health Care Survey

The EBRI/Greenwald & Associates Consumer Engagement in Health Care Survey (CEHCS) is an online survey that examines issues surrounding consumer-driven health care, including the cost of insurance, the cost of care, satisfaction with health care, satisfaction with health care plans, reasons for choosing a plan, and sources of health information. It is co-sponsored by the Employee Benefit Research Institute (EBRI) and Greenwald & Associates, with support from seven private organizations. The 2017 survey was conducted online Aug. 10 to Sept. 1, 2017, using the Ipsos’ consumer panel. Over 3,560 adults ages 21−64 who had health insurance provided through an employer, purchased directly from a carrier, or purchased through a government exchange participated in the survey. However, most survey participants (82 percent) received coverage through an employer. The sample was weighted to reflect the actual proportions in the population ages 21–64 with private, health-insurance coverage. This Issue Brief focuses on differences in consumer engagement in health care by generational cohorts – i.e., Millennials, Baby Boomers, and Gen Xers. Key findings: • Millennials are more satisfied than other generational cohorts with various aspects of their health coverage. More than other generational cohorts, Millennials are satisfied with their health coverage, out-pocket costs, and health plan choices. • Millennials and Generation X engage with health care providers differently than Baby Boomers. Baby Boomers are more likely than Gen Xers and Millennials to have a primary care provider (PCP). Among those with a PCP, Baby Boomers are more likely than Generation X and Millennials to report that they make healthier lifestyle choices after seeing a PCP; that it is important that their PCP knows them and their medical history personally; that their PCP is aware of all of the other medical care that they receive; and that they are comfortable telling their PCP about their health issues. Both Millennials and Generation X are more likely than Baby Boomers to report that they have used a walk-in clinic. • Millennials have the highest rates of wellness program participation. Millennials are nearly across the board more likely than Baby Boomers to participate in various aspects of wellness programs. They are more likely to report that they have visited an on-site clinic; made a tobacco-free pledge or participated in a smoking cessation program; participated in counseling or stress management training; participated in activity-based wellness challenges; received reimbursement for fitness club memberships; attended free seminars; and received financial wellness resources. Millennials are less likely than Baby Boomers to have completed a health risk assessment or biometric screenings.

Individual Health Insurance Market with an Entrant – The ACA Health Insurance Exchange Observations

Abstract In this paper, a general framework is built up to model the dynamic of consumer health plan choice and individual health insurance market competition. A primary goal is to identify driving forces to individual health insurance equilibrium market coverage and premium. In the baseline model, we introduce plan quality information search cost as an additional determinant to consumer’s plan choice. Health insurers compete under the Hotelling’s game theory framework. Equilibrium solutions of the baseline model highlight the importance of budget limit and information search cost to health plan enrollment. The more important objective is to examine the impact of market entrants on equilibrium insurance market coverage and plan prices. In the model with market entry, we add an additional dimension to the baseline model. Equilibrium solutions and numerical studies show positive impact of higher insurance market coverage and lower health plan prices. The Affordable Care Act (ACA) brought multiple unprecedented changes to the health insurance market and provided opportunities to study market dynamics and driving forces. The ACA health insurance exchange market experience shows consistency with our model findings even at the early stage of implementation. More importantly, market observations suggest that entry barriers of claim costs and information search cost are high for entrants.

Does personalized information improve health plan choices when individuals are distracted?

Choice-based health insurance systems allow individuals to select a health plan that fits their needs. However, bounded rationality and limited attention may lead to sub-optimal insurance coverage and higher-than-expected out-of-pocket payments. In this paper, we study the impact of providing personalized information on health plan choices in a laboratory experiment. We seek to more closely mimic real-life choices by randomly providing an incentivized distraction to some individuals. We find that providing personalized information significantly improves health plan choices. The positive effect is even larger and longer-lasting if individuals are distracted from their original task. In addition to providing decision support, receiving personalized information restores the awareness of the choice setting to a level comparable to the case without distraction thus reducing inertia. Our results indicate that increasing transparency of the health insurance system and providing tailored information can help individuals to make better choices and reduce their out-of-pocket expenditures.

Health Literacy and Plan Choice: Implications for Medicare Managed Care.

Background:Older adults with inadequate health literacy may have difficulty selecting optimal coverage when faced with multiple health insurance plans to choose from.Objective:This study sought to examine how health literacy affects which Medicare Advantage plans seniors select.Methods:We surveyed 311 Medicare beneficiaries who did not have concurrent Medicaid coverage. Participants chose from three Medicare Advantage plans: (1) lower-premium, less coverage; (2) higher-premium, more coverage; and (3) an intermediate option. Adjusted associations between health literacy, plan choice, and the importance of plan attributes in decision-making were tested using ordered and multinomial logistic regressions.Key Results:Beneficiaries with inadequate health literacy chose the lower-premium, less coverage plan over the higher-premium, more coverage option compared to beneficiaries with adequate health literacy (p < .05) perhaps because participants with inadequate health literacy tended to rank the importance of plan attributes differently than those with adequate health literacy (p < .05).Conclusions:This evidence suggests there may be a disconnect among those with inadequate health literacy between attributes that were ranked as important and the plans they chose, resulting in choices that are not consistent with their preferences. Beneficiaries with inadequate health literacy may be at increased risk of selecting plans that do not meet their health needs, resulting in reduced access and higher costs. Medicare and consumer groups should support interventions to raise literacy levels and those that reduce the reliance on literacy when plan shopping. [HLRP: Health Literacy Research and Practice. 2018;2(1):e40–e54.]Plain Language Summary:We examined how health literacy affects seniors' choice of Medicare Advantage plans. Results indicate that beneficiaries with inadequate health literacy chose the lower-premium, less coverage plan over the higher-premium, more coverage option compared to beneficiaries with adequate health literacy. Beneficiaries with inadequate health literacy tended to rank the importance of plan attributes differently than those with adequate health literacy.

The Role of Prices Relative to Supplemental Benefits and Service Quality in Health Plan Choice

AbstractThis article links representative enrollee panel data to health plan data on (1) prices, (2) service quality, and (3) nonessential benefits for the German statutory multipayer market and the years 2007–2010. We first show that although heavy federal regulation ensures a simple choice architecture, the majority of health plans are dominated—even when considering four nonprice attributes. Enrollees in dominated plans are older, less educated, and unhealthier. Second, we assess how switchers value prices relative to nonprice health plan attributes. Our mixed logit models incorporate a total of 1,700 health plan choices with each more than 50 choice sets. While prices are an important determinant for nearly everyone, 40 percent of all switchers do not seem to value service quality and supplemental benefits when choosing health plans.

Introducing risk adjustment and free health plan choice in employer-based health insurance: Evidence from Germany

To equalize differences in health plan premiums due to differences in risk pools, the German legislature introduced a simple Risk Adjustment Scheme (RAS) based on age, gender and disability status in 1994. In addition, effective 1996, consumers gained the freedom to choose among hundreds of existing health plans, across employers and state-borders. This paper (a) estimates RAS pass-through rates on premiums, financial reserves, and expenditures and assesses the overall RAS impact on market price dispersion. Moreover, it (b) characterizes health plan switchers and investigates their annual and cumulative switching rates over time. Our main findings are based on representative enrollee panel data linked to administrative RAS and health plan data. We show that sickness funds with bad risk pools and high pre-RAS premiums lowered their total premiums by 42 cents per additional euro allocated by the RAS. Consequently, post-RAS, health plan prices converged but not fully. Because switchers are more likely to be white collar, young and healthy, the new consumer choice resulted in more risk segregation and the amount of money redistributed by the RAS increased over time.

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.

Consumer Health Insurance Shopping Behavior and Challenges: Lessons From Two State-Based Marketplaces.

Selecting a health plan in a health insurance exchange is a critical decision, yet consumers are known to face challenges with health plan choice. We surveyed new enrollees in two state-based exchanges in 2015 to investigate how a nonelderly, primarily low-income population chose their health plans and the implications of shopping behavior for early experiences in their plans. Financial considerations were most important to enrollees. Prior Medicaid enrollees and the uninsured were more likely to have multiple shopping challenges (e.g., difficulty identifying the best or most affordable plan, fair/poor experience, unmet need for help) than enrollees with prior employer coverage (42.9% vs. 32.5% vs. 16.4%, respectively, p < .01). Shopping challenges were associated with difficulty finding a doctor, understanding coverage, and getting questions answered. Assistance targeting enrollees who previously had Medicaid or lacked insurance could improve both shopping experiences and downstream outcomes in plans.

Choose to Lose: Health Plan Choices from a Menu with Dominated Option*

Abstract We examine the health plan choices that 23,894 employees at a U.S. firm made from a large menu of options that differed only in financial cost-sharing and premium. These decisions provide a clear test of the predictions of the standard economic model of insurance choice in the absence of choice frictions because plans were priced so that nearly every plan with a lower deductible was financially dominated by an otherwise identical plan with a high deductible. We document that the majority of employees chose dominated plans, which resulted in excess spending equivalent to 24% of chosen plan premiums. Low-income employees were significantly more likely to choose dominated plans, and most employees did not switch into more financially efficient plans in the subsequent year. We show that the choice of dominated plans cannot be rationalized by standard risk preference or any expectations about health risk. Testing alternative explanations with a series of hypothetical-choice experiments, we find that the popularity of dominated plans was not primarily driven by the size and complexity of the plan menu, nor informed preferences for avoiding high deductibles, but by employees’ lack of understanding of health insurance. Our findings challenge the standard practice of inferring risk preferences from insurance choices and raise doubts about the welfare benefits of health reforms that expand consumer choice.

The Costs of Poor Health (Plan Choices) &amp; Prescriptions for Reform

Evidence suggests that when confronted with a large menu of health plan choices, consumers may not select the most efficient (that is, the most cost-effective) option. In anticipation of such problems, the exchanges set up by the Affordable Care Act (ACA) were designed to help consumers navigate the complexity of plan choices. Yet little is known about the actual efficiency with which ACA enrollees select plans. We present an analysis of projected health spending and a series of hypothetical plan choice experiments to explore the financial consequences of inefficient choices among potential ACA enrollees, the likelihood of such inefficient choices, and the potential for improving efficiency with a more behaviorally informed choice architecture. Our findings indicate that choosing a plan incommensurate with one's expected health care needs would lead to significant overspending relative to the most cost-effective plan and that, despite attempts to design the exchanges so that they facilitate decisionmaking, a significant share of ACA enrollees may have made inefficient decisions. More promisingly, we find that although the metal labels used in the exchanges to organize plans (for example, Bronze and Silver) encourage choices that are no more efficient than those associated with generic plan labels (such as Plan A and Plan B), labels that more sensibly reflect the factors consumers ought to consider—for instance, labels that emphasize gradations in the need for health care—do lead to significant improvements in the efficiency of plan choices.

Health plan choice in the Netherlands: restrictive health plans preferred by young and healthy individuals.

In a health care system based on managed competition, health insurers negotiate on quality and price with care providers and are allowed to offer restrictive health plans. It is crucial that enrolees who need care choose restrictive health plans, as otherwise health insurers cannot channel patients to contracted providers and they will lose their bargaining power in negotiations with providers. We aim to explain enrolees' choice of a restrictive health plan in exchange for a lower premium. In 2014 an online survey with an experimental design was conducted on members of an access panel (response 78%; n=3,417). Results showed 37.4% of respondents willing to choose a restrictive health plan in exchange for a lower premium. This fell to 22% when the restrictive health plan also included a longer travelling time. Enrolees who choose a restrictive health plan are younger and healthier, or on lower incomes, than those preferring a non-restrictive one. This means that enrolees who use care will be unlikely to choose a restrictive health plan and, therefore, health insurers will not be able to channel them to contracted care providers. This undermines the goals of the health care system based on managed competition.

Young Adults Make Different Health Plan Choices on ACA Exchange Than Older Adults

Young Adults Make Different Health Plan Choices on ACA Exchange Than Older Adults

The costs of poor health (plan choices) &amp; prescriptions for reform

Evidence suggests that when confronted with a large menu of health plan choices, consumers may not select the most efficient (that is, the most cost-effective) option. In anticipation of such problems, the exchanges set up by the Affordable Care Act (ACA) were designed to help consumers navigate the complexity of plan choices. Yet little is known about the actual efficiency with which ACA enrollees select plans. We present an analysis of projected health spending and a series of hypothetical plan choice experiments to explore the financial consequences of inefficient choices among potential ACA enrollees, the likelihood of such inefficient choices, and the potential for improving efficiency with a more behaviorally informed choice architecture. Our findings indicate that choosing a plan incommensurate with one's expected health care needs would lead to significant overspending relative to the most cost-effective plan and that, despite attempts to design the exchanges so that they facilitate decision-making, a significant share of ACA enrollees may have made inefficient decisions. More promisingly, we find that although the metal labels used in the exchanges to organize plans (for example, Bronze and Silver ) encourage choices that are no more efficient than those associated with generic plan labels (such as Plan A and Plan B ), labels that more sensibly reflect the factors consumers ought to consider—for instance, labels that emphasize gradations in the need for health care—do lead to significant improvements in the efficiency of plan choices.

Introducing Risk Adjustment and Free Health Plan Choice in Employer-Based Health Insurance: Evidence from Germany

To equalize differences in health plan premiums due to differences in risk pools, the German legislature introduced a simple Risk Adjustment Scheme (RAS) based on age, gender and disability status in 1994. In addition, effective 1996, consumers gained the freedom to choose among hundreds of existing health plans, across employers and state-borders. This paper (a) estimates RAS pass-through rates on premiums, financial reserves, and expenditures and assesses the overall RAS impact on market price dispersion. Moreover, it (b) characterizes health plan switchers and investigates their annual and cumulative switching rates over time. Our main findings are based on representative enrollee panel data linked to administrative RAS and health plan data. We show that sickness funds with bad risk pools and high pre-RAS premiums lowered their total premiums by 42 cents per additional euro allocated by the RAS. Consequently, post-RAS, health plan prices converged but not fully. Because switchers are more likely to be white collar, young and healthy, the new consumer choice resulted in more risk segregation and the amount of money redistributed by the RAS increased over time.

Introducing Risk Adjustment and Free Health Plan Choice in Employer-Based Health Insurance: Evidence from Germany

To equalize differences in health plan premiums due to differences in risk pools, the German legislature introduced a simple Risk Adjustment Scheme (RAS) based on age, gender and disability status in 1994. In addition, effective 1996, consumers gained the freedom to choose among hundreds of existing health plans, across employers and state-borders. This paper (a) estimates RAS pass-through rates on premiums, financial reserves, and expenditures and assesses the overall RAS impact on market price dispersion. Moreover, it (b) characterizes health plan switchers and investigates their annual and cumulative switching rates over time. Our main findings are based on representative enrollee panel data linked to administrative RAS and health plan data. We show that sickness funds with bad risk pools and high pre-RAS premiums lowered their total premiums by 42 cents per additional euro allocated by the RAS. Consequently, post-RAS, health plan prices converged but not fully. Because switchers are more likely to be white collar, young and healthy, the new consumer choice resulted in more risk segregation and the amount of money redistributed by the RAS increased over time.

Association Between Employee Earnings and Consumer-Directed Health Plan Choices

INTRODUCTIONThis study explores the relationship between employee earnings and choice of a consumer-directed health plan (CDI IP) verses a managed care plan in an employer-sponsored insurance (ESI) program. The increased variation in healthcare insurance plan designs over the past decade has led to a greater need to understand the impact of consumer choice with respect to health insurance plans. CDHPs are associated with plan designs that incorporate high deductibles and greater cost sharing. Researchers have consistently found that employee earnings are positively associated with CDHP enrollment (Barry, Cullen, Galusha, Slade, & Busch, 2008; Buntin et al., 2006; Cohen & Martinez, 2009; Dicken, 2006; lx) Sasso, Rice, Gabel, & Whitmore, 2004; Parente, Feldman, & Christianson, 2004a, 2004b, 2008; Tollen, Ross, & Poor, 2004). However, it is unclear if variations in CDHP choice are discernable at all levels of employee earnings.CDHPs emerged in the early 2000s as an alternative healthcare insurance plan design intended to slow the persistent cost increases of ESI, which have nearly doubled since the late 1990s (Claxton et al., 2014). From 2006 to 2014, CDHP enrollment for ESI plans has grown from 4% to 20%, with 27% of employers offering at least one CDHP plan (Kaiser Family Foundation, 2013). Through high deductibles and greater upfront cost sharing by enrollees, CDHPs encourage consumer engagement in healthcare decision making to presumably lower discretionary healthcare use and facilitate better healthcare choices, thus reducing ESI costs or slowing their rate of growth.Health Reimbursement Arrangements and Health Savings Account-Eligible PlansHealth reimbursement arrangements (I IRAs) and health savings account (1ISA)-eligible high-deductible plans have become the two primary CDHP models. From the perspective of enrollees, HRA designs are similar to HSAs relative to the financing arrangement or savings account, but unlike I IS As, I IRA funds are not owned by employees and do not require coupling with a highdeductible plan (Bloche, 2006).HRAs emerged in 2001 and were modeled on the 1996 medical savings account (MSA) pilot program that was part of the Health Insurance Portability and Accountability Act (Parente et al., 2008). Although I IRAs can be offered as a stand-alone, defined-contribution vehicle, they usually are coupled with a high-deductible plan. Employers finance the HRA to offset enrollee out-of-pocket costs; however, a gap or donut hole in coverage remains. The donut-hole phase-the employee's high-deductible period-takes place when I IRA funds are exhausted and before plan indemnity begins.HSAs were established as part of Medicare legislation passed in 2003 (Parente et al., 2008). HSAs introduced employee funding and ownership of the medical spending account, which is portable, may contain investment characteristics, and allows greater employee control over the level of funding to subsidize healthcare costs. The level of employee funding, and annual accrual of such funds, determines enrollees' exposure to out-ofpocket costs during the high-deductible period.Association Between CDHPs and Enrollee EarningsResearch findings show a positive association between CDHPs and enrollee earnings, which may suggest favorable selection (Barry et al., 2008; Buntin et al., 2006; Cohen & Martinez, 2009; Dicken, 2006; Id Sasso et al., 2004; Parente et al., 2004a, 2004b, 2008; Tollen et al., 2004). Individuals in higher socioeconomic groups are generally healthier and require fewer healthcare services than do those in lower socioeconomic groups (Bloche, 2007; Hughes-Cromwick, Root, & Reohrig, 2007; Marquis et al., 2006). Alternatively, households with higher earnings may have a higher risk tolerance or premium cost elasticity, meaning they are less willing to pay higher premiums for lower cost-sharing risk (Callan & Johnson, 2002; Parente et al. …

Wage Growth for the Health Care Workforce: Projecting the Affordable Care Act Impact.

To predict changes in wage growth for health care workers based on projections of insurance enrollment from the Affordable Care Act (ACA). Enrollment data came from three large employers and a sampling of premiums from ehealthinsurance.com. Information on state Medicaid eligibility rules and costs were from the Kaiser Family Foundation. National predictions were based on the MEPS and Medicare Current Beneficiary surveys. Bureau of Labor Statistics data were used to estimate employment. We projected health insurance enrollment by plan type using a health plan choice model. Using claims data, we measured the services demanded for each plan choice and year. Projections of labor demand were based on current output/input ratios. Changes in wages resulting from changes in labor demand from 2014 to 2021 were based on labor supply and demand elasticities. Expenditures required to retain and grow the health care workforce will increase substantially. Wages will increase most for professions with the greatest training requirements (physicians and registered nurses). The largest impact will be felt in 2015. Projected wage increases for health care workers may drive substantial growth in insurance premiums and reduce the affordability of health insurance.

Does Price Framing Affect the Consumer Price Sensitivity of Health Plan Choice?

Hendrik Schmitz and Nicolas R. Ziebarth Hendrik Schmitz is a professor of statistics and empirical economics at the University of Paderborn and also affiliated with CINCH and RWI. Nicolas R. Ziebarth is an Assistant Professor at Cornell University in the Department of Policy Analysis and Management (PAM) and also affiliated with IZA and DIW.

How can the regulator show evidence of (no) risk selection in health insurance markets? Conceptual framework and empirical evidence

If consumers have a choice of health plan, risk selection is often a serious problem (e.g., as in Germany, Israel, the Netherlands, the United States of America, and Switzerland). Risk selection may threaten the quality of care for chronically ill people, and may reduce the affordability and efficiency of healthcare. Therefore, an important question is: how can the regulator show evidence of (no) risk selection? Although this seems easy, showing such evidence is not straightforward. The novelty of this paper is two-fold. First, we provide a conceptual framework for showing evidence of risk selection in competitive health insurance markets. It is not easy to disentangle risk selection and the insurers’ efficiency. We suggest two methods to measure risk selection that are not biased by the insurers’ efficiency. Because these measures underestimate the true risk selection, we also provide a list of signals of selection that can be measured and that, in particular in combination, can show evidence of risk selection. It is impossible to show the absence of risk selection. Second, we empirically measure risk selection among the switchers, taking into account the insurers’ efficiency. Based on 2-year administrative data on healthcare expenses and risk characteristics of nearly all individuals with basic health insurance in the Netherlands (N > 16 million) we find significant risk selection for most health insurers. This is the first publication of hard empirical evidence of risk selection in the Dutch health insurance market.