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Selection Stories: Understanding Movement Across Health Plans

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  • David M. Cutler
  • Bryan Lincoln
  • Richard J. Zeckhauser

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, where lack of all movement makes plans with initially older enrollees increase in cost over time. Using data from the Group Insurance Commission in Massachusetts, we show that aging in place and adverse selection are both quantitatively important. Each can materially impact equilibrium enrollments, especially when premiums to enrollees reflect these costs.

Suggested Citation

  • David M. Cutler & Bryan Lincoln & Richard J. Zeckhauser, 2009. "Selection Stories: Understanding Movement Across Health Plans," NBER Working Papers 15164, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:15164
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    References listed on IDEAS

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    1. David M. Cutler & Richard J. Zeckhauser, 1998. "Adverse Selection in Health Insurance," NBER Chapters, in: Frontiers in Health Policy Research, Volume 1, pages 1-32, National Bureau of Economic Research, Inc.
    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.
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    4. M. Kate Bundorf & Jonathan Levin & Neale Mahoney, 2012. "Pricing and Welfare in Health Plan Choice," American Economic Review, American Economic Association, vol. 102(7), pages 3214-3248, December.
    5. Samuelson, William & Zeckhauser, Richard, 1988. "Status Quo Bias in Decision Making," Journal of Risk and Uncertainty, Springer, vol. 1(1), pages 7-59, March.
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    7. 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.
    8. McClellan, Mark & Cutler, David & Newhous, Joseph P., 2000. "How Does Managed Care Do It?," Scholarly Articles 2643884, Harvard University Department of Economics.
    9. Strombom, Bruce A. & Buchmueller, Thomas C. & Feldstein, Paul J., 2002. "Switching costs, price sensitivity and health plan choice," Journal of Health Economics, Elsevier, vol. 21(1), pages 89-116, January.
    10. Selden, Thomas M., 1999. "Premium subsidies for health insurance: excessive coverage vs. adverse selection," Journal of Health Economics, Elsevier, vol. 18(6), pages 709-725, December.
    11. Michael Rothschild & Joseph Stiglitz, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 90(4), pages 629-649.
    12. Matthew L. Maciejewski & Bryan Dowd & Heidi O'Connor, 2004. "Multiple Prior Years of Health Expenditures and Medicare Health Plan Choice," International Journal of Health Economics and Management, Springer, vol. 4(3), pages 247-261, September.
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    Cited by:

    1. Aouad, Marion, 2021. "An Examination of the Intracorrelation of Family Health Insurance," IZA Discussion Papers 14541, Institute of Labor Economics (IZA).
    2. Michiel Bijlsma & Jan Boone & Gijsbert Zwart, 2014. "Competition leverage: how the demand side affects optimal risk adjustment," RAND Journal of Economics, RAND Corporation, vol. 45(4), pages 792-815, December.
    3. Marcus C. Christiansen & Martin Eling & Jan-Philipp Schmidt & Lorenz Zirkelbach, 2016. "Who is Changing Health Insurance Coverage? Empirical Evidence on Policyholder Dynamics," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 83(2), pages 269-300, June.
    4. Clark, Robert L. & Morrill, Melinda Sandler & Vanderweide, David, 2014. "The effects of retiree health insurance plan characteristics on retirees’ choice and employers’ costs," Journal of Health Economics, Elsevier, vol. 38(C), pages 119-129.
    5. McGuire, Thomas G. & Newhouse, Joseph P. & Normand, Sharon-Lise & Shi, Julie & Zuvekas, Samuel, 2014. "Assessing incentives for service-level selection in private health insurance exchanges," Journal of Health Economics, Elsevier, vol. 35(C), pages 47-63.
    6. H. E. Frech & Michael P. Smith, 2015. "Anatomy of a Slow-Motion Health Insurance Death Spiral," North American Actuarial Journal, Taylor & Francis Journals, vol. 19(1), pages 60-72, January.
    7. Jacob Glazer & Thomas G. McGuire & Julie Shi, 2016. "Risk Adjustment of Health Plan Payments to Correct Inefficient Plan Choice from Adverse Selection," NBER Chapters, in: Measuring and Modeling Health Care Costs, pages 379-418, National Bureau of Economic Research, Inc.
    8. Cardon, James H., 2020. "Loss aversion and health insurance plan switching," Journal of Economic Behavior & Organization, Elsevier, vol. 180(C), pages 955-966.
    9. Wuppermann, Amelie Catherine, 2011. "Empirical Essays in Health and Education Economics," Munich Dissertations in Economics 13187, University of Munich, Department of Economics.
    10. 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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    More about this item

    JEL classification:

    • I0 - Health, Education, and Welfare - - General
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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