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The Impact of Tort Reform on Employer-Sponsored Health Insurance Premiums

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Author Info
Ronen Avraham
Leemore S. Dafny
Max M. Schanzenbach
Abstract

We evaluate the effect of tort reform on employer-sponsored health insurance premiums by exploiting state-level variation in the timing of reforms. Using a dataset of healthplans representing over 10 million Americans annually between 1998 and 2006, we find that caps on non-economic damages, collateral source reform, and joint and several liability reform reduce premiums by 1 to 2 percent each. These reductions are concentrated in PPOs rather than HMOs, suggesting that can HMOs can reduce “defensive” healthcare costs even absent tort reform. The results are the first direct evidence that tort reform reduces healthcare costs in aggregate; prior research has focused on particular medical conditions.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15371.

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Date of creation: Sep 2009
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Handle: RePEc:nbr:nberwo:15371

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Find related papers by JEL classification:
H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability

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  5. Kessler, Daniel & McClellan, Mark, 2002. "Malpractice law and health care reform: optimal liability policy in an era of managed care," Journal of Public Economics, Elsevier, vol. 84(2), pages 175-197, May. [Downloadable!] (restricted)
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