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Contracting with Limited Commitment: Evidence from Employment-Based Health Insurance Contracts

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  • Crocker, Keith J
  • Moran, John R
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    Abstract

    Impediments to worker mobility serve to mitigate the attrition of healthy individuals from employer-sponsored insurance pools, thereby creating a de facto commitment mechanism that allows for more complete insurance of health risks than would be possible in the absence of such frictions. Using data on health insurance contracts obtained from the 1987 National Medical Expenditure Survey, we find that the quantity of insurance provided is positively related to the degree of worker commitment. These results illustrate the importance of commitment in the design of long-term contracts, and provide an additional rationale for the bundling of health insurance with employment. Copyright 2003 by the RAND Corporation.

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    Bibliographic Info

    Article provided by The RAND Corporation in its journal RAND Journal of Economics.

    Volume (Year): 34 (2003)
    Issue (Month): 4 (Winter)
    Pages: 694-718

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    Handle: RePEc:rje:randje:v:34:y:2003:i:4:p:694-718

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    Cited by:
    1. Miller, Nolan H., 2005. "Pricing health benefits: A cost-minimization approach," Journal of Health Economics, Elsevier, vol. 24(5), pages 931-949, September.
    2. Darius Lakdawalla & Neeraj Sood, 2006. "Health Insurance as a Two-Part Pricing Contract," NBER Working Papers 12681, National Bureau of Economic Research, Inc.
    3. Grönqvist, Erik, 2004. "Information Updating and Insurance Dropout: Evidence from Dental Insurance," Working Paper Series in Economics and Finance 576, Stockholm School of Economics.
    4. Jayanta Bhattacharya & William B. Vogt, 2006. "Employment and Adverse Selection in Health Insurance," NBER Working Papers 12430, National Bureau of Economic Research, Inc.
    5. Annette Hofmann & Mark Browne, 2013. "One-sided commitment in dynamic insurance contracts: Evidence from private health insurance in Germany," Journal of Risk and Uncertainty, Springer, vol. 46(1), pages 81-112, February.
    6. Hanming Fang & Alessandro Gavazza, 2007. "Dynamic Inefficiencies in Employment-Based Health Insurance System Theory and Evidence," NBER Working Papers 13371, National Bureau of Economic Research, Inc.
    7. 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.
    8. Hanming Fang & Alessandro Gavazza, 2010. "Dynamic Inefficiencies in an Employment-Based Health Insurance System: Theory and Evidence," Working Papers 10-01, Duke University, Department of Economics.
    9. Ran Abramitzky, 2008. "The Limits of Equality: Insights from the Israeli Kibbutz," Discussion Papers 07-048, Stanford Institute for Economic Policy Research.

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