This study examines the effect of price on the demand for health insurance by early retirees between the ages of 55 and 64. The analysis is based on administrative data from a medium sized employer and takes advantage of a natural experiment created by the firm's health insurance contribution policy. The amount the firm contributes toward retiree health insurance coverage depends on when a person retired and her years of service at that date. As a result of this policy, there is considerable variation in out-of-pocket premiums faced by individuals in the data, but this variation is independent of the non-price attributes of the health insurance plans offered, and plausibly exogenous to individual characteristics that are likely to affect the demand for insurance. We find that price has a statistically significant but small effect on the decision to take up coverage. The implied elasticities are very similar to results found in previous studies using very different data.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
11951.
Length: Date of creation: Jan 2006 Date of revision: Handle: RePEc:nbr:nberwo:11951
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Find related papers by JEL classification: D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Private Pensions
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