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Employee Choice of Health Insurance

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  • Ellis, Randall P

Abstract

A new specification of health-insurance-plan choice is developed that uses a nonparametric functional form for the loss function used to evaluate insurance premiums and uncertain out-of-pocket expenditure. The approach is implemented on data resulting from one firm's implementation of a new health plan with three distinct health insurance options. Health expenditure differences greater than 500 percent are observed, indicating extremely strong biased selection. Plan choices are consistent with a convex loss function for small losses, which suggests that consumers underweight high-loss/low-probability outcomes relative to low-loss/high-probability ones. Copyright 1989 by MIT Press.

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Bibliographic Info

Article provided by MIT Press in its journal Review of Economics & Statistics.

Volume (Year): 71 (1989)
Issue (Month): 2 (May)
Pages: 215-23

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Handle: RePEc:tpr:restat:v:71:y:1989:i:2:p:215-23

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Web page: http://mitpress.mit.edu/journals/

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Web: http://mitpress.mit.edu/journal-home.tcl?issn=00346535

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Cited by:
  1. Robert Nuscheler & Thomas Knaus, 2005. "Risk selection in the German public health insurance system," Health Economics, John Wiley & Sons, Ltd., vol. 14(12), pages 1253-1271.
  2. Altman, Daniel & Cutler, David & Zeckhauser, Richard, 2003. "Enrollee mix, treatment intensity, and cost in competing indemnity and HMO plans," Journal of Health Economics, Elsevier, vol. 22(1), pages 23-45, January.
  3. Bo, H. & Lensink, R., 2000. "Is the investment-uncertainty relationship non-linear? : an emperical [i.e. empirical] analysis for the Netherlands," Research Report 00E44, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
  4. Carine Franc & Marc Perronnin & Aurélie Pierre, 2010. "Subscribing to Supplemental Health Insurance in France: A Dynamic Analysis of Adverse Selection," Working Papers DT35, IRDES institut for research and information in health economics, revised Dec 2010.
  5. van de Ven, Wynand P. M. M. & van Vliet, ReneC. J. A., 1995. "Consumer information surplus and adverse selection in competitive health insurance markets: An empirical study," Journal of Health Economics, Elsevier, vol. 14(2), pages 149-169, June.
  6. Alan C. Monheit & Thomas M. Selden, 2000. "Cross-subsidization in the market for employment-related health insurance," Health Economics, John Wiley & Sons, Ltd., vol. 9(8), pages 699-714.
  7. Fernando Ruiz & Liliana Amaya & Stella Venegas, 2007. "Progressive segmented health insurance: Colombian health reform and access to health services," Health Economics, John Wiley & Sons, Ltd., vol. 16(1), pages 3-18.
  8. Randall Ellis, 2012. "Five questions for health economists," International Journal of Health Care Finance and Economics, Springer, vol. 12(3), pages 217-233, September.
  9. Andreas Million & Regina T. Riphahn & Achim Wambach, 2003. "Incentive effects in the demand for health care: a bivariate panel count data estimation," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(4), pages 387-405.
  10. Lu Ji & Fei Liu, 2007. "HMO versus non-HMO private managed care plans: an investigation on pre-switch consumption," Health Care Management Science, Springer, vol. 10(1), pages 67-80, February.
  11. John A. Rizzo, 2005. "Are HMOs bad for health maintenance?," Health Economics, John Wiley & Sons, Ltd., vol. 14(11), pages 1117-1131.
  12. Ricardo Sanhueza & Jaime Ruiz-Tagle, 2002. "Choosing Health Insurance in a Dual Health Care System: The Chilean Case," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 157-184, May.
  13. Jean Marie Abraham & William B. Vogt & Martin Gaynor, 2002. "Household Demand for Employer-Based Health Insurance," NBER Working Papers 9144, National Bureau of Economic Research, Inc.

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