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Selection stories: Understanding movement across health plans

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  • Cutler, David
  • Lincoln, Bryan
  • Zeckhauser, Richard

Abstract

This study assesses the factors influencing the movement of people across health plans. We distinguish three types of cost-related transitions: adverse selection, the movement of the less healthy to more generous plans; adverse retention, the tendency for people to stay where they are when they get sick; and aging in place, enrollees' inertia in plan choice, leading plans with older enrollees to increase in relative cost over time. Using data from the Group Insurance Commission in Massachusetts, we show that adverse selection and aging in place are both quantitatively important. Either can materially impact equilibrium enrollments, especially when premiums to enrollees reflect these costs.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Health Economics.

Volume (Year): 29 (2010)
Issue (Month): 6 (December)
Pages: 821-838

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Handle: RePEc:eee:jhecon:v:29:y:2010:i:6:p:821-838

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Web page: http://www.elsevier.com/locate/inca/505560

Related research

Keywords: Adverse retention Aging in place Health insurance;

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References

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  1. Altman, Daniel & Cutler, David & Zeckhauser, Richard, 2003. "Enrollee mix, treatment intensity, and cost in competing indemnity and HMO plans," Journal of Health Economics, Elsevier, Elsevier, vol. 22(1), pages 23-45, January.
  2. Cutler David M. & Zeckhauser Richard J., 1998. "Adverse Selection in Health Insurance," Forum for Health Economics & Policy, De Gruyter, De Gruyter, vol. 1(1), pages 1-33, January.
  3. Selden, Thomas M., 1999. "Premium subsidies for health insurance: excessive coverage vs. adverse selection," Journal of Health Economics, Elsevier, Elsevier, vol. 18(6), pages 709-725, December.
  4. M. Bundorf & Jonathan Levin & Neale Mahoney, 2008. "Pricing and Welfare in Health Plan Choice," Discussion Papers, Stanford Institute for Economic Policy Research 07-047, Stanford Institute for Economic Policy Research.
  5. Anne Beeson Royalty & Neil Solomon, 1999. "Health Plan Choice: Price Elasticities in a Managed Competition Setting," Journal of Human Resources, University of Wisconsin Press, vol. 34(1), pages 1-41.
  6. Rothschild, Michael & Stiglitz, Joseph E, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 90(4), pages 630-49, November.
  7. Matthew L. Maciejewski & Bryan Dowd & Heidi O'Connor, 2004. "Multiple Prior Years of Health Expenditures and Medicare Health Plan Choice," International Journal of Health Care Finance and Economics, Springer, Springer, vol. 4(3), pages 247-261, 09.
  8. David M. Cutler & Sarah J. Reber, 1998. "Paying For Health Insurance: The Trade-Off Between Competition And Adverse Selection," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 113(2), pages 433-466, May.
  9. David M. Cutler & Richard J. Zeckhauser, 1999. "The Anatomy of Health Insurance," NBER Working Papers 7176, National Bureau of Economic Research, Inc.
  10. Samuelson, William & Zeckhauser, Richard, 1988. " Status Quo Bias in Decision Making," Journal of Risk and Uncertainty, Springer, Springer, vol. 1(1), pages 7-59, March.
  11. Strombom, Bruce A. & Buchmueller, Thomas C. & Feldstein, Paul J., 2002. "Switching costs, price sensitivity and health plan choice," Journal of Health Economics, Elsevier, Elsevier, vol. 21(1), pages 89-116, January.
  12. McClellan, Mark & Cutler, David & Newhous, Joseph P., 2000. "How Does Managed Care Do It?," Scholarly Articles 2643884, Harvard University Department of Economics.
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Citations

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Cited by:
  1. Michiel Bijlsma & Gijsbert Zwart & Jan Boone, 2011. "Competition leverage: How the demand side affects optimal risk adjustment," CPB Discussion Paper 181, CPB Netherlands Bureau for Economic Policy Analysis.
  2. Jacob Glazer & Thomas G. McGuire & Julie Shi, 2013. "Risk Adjustment of Health Plan Payments to Correct Inefficient Plan Choice from Adverse Selection," NBER Chapters, in: Measuring and Modeling Health Care Costs National Bureau of Economic Research, Inc.
  3. Christiansen, Marcus & Eling, Martin & Schmidt, Jan-Philipp & Zirkelbach, Lorenz, 2012. "Who is Changing Health Insurance Coverage? Empirical Evidence on Policyholder Dynamics," Working Papers on Finance 1223, University of St. Gallen, School of Finance.
  4. Wuppermann, Amelie Catherine, 2011. "Empirical Essays in Health and Education Economics," Munich Dissertations in Economics 13187, University of Munich, Department of Economics.
  5. Robert Clark & Melinda Morrill & David Vanderweide, 2013. "The Effects of Retiree Health Insurance Plan Characteristics on Retirees’ Choice and Employers’ Costs," NBER Working Papers 19566, National Bureau of Economic Research, Inc.
  6. Jacob Glazer & Thomas McGuire & Julie Shi, 2014. "Risk Adjustment of Health Plan Payments to Correct Inefficient Plan Choice from Adverse Selection," NBER Working Papers 19998, National Bureau of Economic Research, Inc.
  7. Benjamin R. Handel, 2011. "Adverse Selection and Switching Costs in Health Insurance Markets: When Nudging Hurts," NBER Working Papers 17459, National Bureau of Economic Research, Inc.

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