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Household Demand for Employer-Based Health Insurance

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  • Jean Marie Abraham
  • William B. Vogt
  • Martin Gaynor

Abstract

We use the 1996 Medical Expenditure Panel Survey to estimate a model of household demand for employer-based health insurance, explicitly investigating differences in behavior between households with two potential sources of coverage and those with one source. Own and cross-price elasticities are estimated for three types of health plans, including exclusive provider organizations, any provider organizations, and mixed provider organizations. We find that the premium, family size, income, and wealth significantly affect demand. Our elasticity estimates reveal an overall, small behavioral response to changes in price with respect to health plan switching and take-up. Finally, we discuss the implications of our findings with respect to employer benefit design.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9144.

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Date of creation: Sep 2002
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Publication status: published as Abraham, Jean Marie, William B. Vogt, William B., and Martin S. Gaynor. "How Do Households Choose Their Employer-Bases Health Insurance?" Inquiry 43, 4 (Winter 2006-2007): 315-32.
Handle: RePEc:nbr:nberwo:9144

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  1. Feldstein, Martin S, 1973. "The Welfare Loss of Excess Health Insurance," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 81(2), pages 251-80, Part I, M.
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  3. Short, Pamela Farley & Taylor, Amy K., 1989. "Premiums, benefits, and employee choice of health insurance options," Journal of Health Economics, Elsevier, vol. 8(3), pages 293-311, December.
  4. Roger Feldman & Michael Finch & Bryan Dowd & Steven Cassou, 1989. "The Demand for Employment-Based Health Insurance Plans," Journal of Human Resources, University of Wisconsin Press, vol. 24(1), pages 115-142.
  5. David M. Cutler & Sarah Reber, 1996. "Paying for Health Insurance: The Tradeoff between Competition and Adverse Selection," NBER Working Papers 5796, National Bureau of Economic Research, Inc.
  6. McFadden, Daniel, 1974. "The measurement of urban travel demand," Journal of Public Economics, Elsevier, vol. 3(4), pages 303-328, November.
  7. Marquis, M Susan & Holmer, Martin R, 1996. "Alternative Models of Choice under Uncertainty and Demand for Health Insurance," The Review of Economics and Statistics, MIT Press, vol. 78(3), pages 421-27, August.
  8. Charles E. Phelps, 1976. "Demand for Reimbursement Insurance," NBER Chapters, in: The Role of Health Insurance in the Health Services Sector, pages 115-162 National Bureau of Economic Research, Inc.
  9. Melissa W. Barringer & Olivia S. Mitchell, . "Workers' Preferences Among Company-Provided Health Insurance Plans," Pension Research Council Working Papers 94-5, Wharton School Pension Research Council, University of Pennsylvania.
  10. Ellis, Randall P, 1989. "Employee Choice of Health Insurance," The Review of Economics and Statistics, MIT Press, vol. 71(2), pages 215-23, May.
  11. Gruber, Jonathan & McKnight, Robin, 2003. "Why did employee health insurance contributions rise?," Journal of Health Economics, Elsevier, vol. 22(6), pages 1085-1104, November.
  12. Marquis, M Susan & Phelps, Charles E, 1987. "Price Elasticity and Adverse Selection in the Demand for Supplementary Health Insurance," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 25(2), pages 299-313, April.
  13. 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.
  14. Buchmueller, Thomas C. & Feldstein, Paul J., 1997. "The effect of price on switching among health plans," Journal of Health Economics, Elsevier, vol. 16(2), pages 231-247, April.
  15. Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, Econometric Society, vol. 46(6), pages 1251-71, November.
  16. Dranove, David & Spier, Kathryn E. & Baker, Laurence, 2000. "'Competition' among employers offering health insurance," Journal of Health Economics, Elsevier, vol. 19(1), pages 121-140, January.
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Cited by:
  1. Tracy L. Regan & Gulcin Gumus, 2006. "Tax Incentives as a Solution to the Uninsured: Evidence from the Self-Employed," Working Papers, University of Miami, Department of Economics 0709, University of Miami, Department of Economics, revised Oct 2007.
  2. Panos Kanavos & Marin Gemmill-Toyama, 2010. "Prescription drug coverage among elderly and disabled Americans: can Medicare—Part D reduce inequities in access?," International Journal of Health Care Finance and Economics, Springer, vol. 10(3), pages 203-218, September.
  3. Ángel López-Nicolás & Marcos Vera-Hernández, 2002. "Are tax subsidies for private medical insurance self-financing? Evidence from a microsimulation model for outpatient and inpatient episodes," Working Papers, Research Center on Health and Economics, Department of Economics and Business, Universitat Pompeu Fabra 632, Department of Economics and Business, Universitat Pompeu Fabra, revised Oct 2004.
  4. Laura Bucila, 2008. "Employment-Based Health Insurance and the Minimum Wage," Working Papers, College of the Holy Cross, Department of Economics 0812, College of the Holy Cross, Department of Economics.
  5. Randall Ellis & Elizabeth Savage, 2008. "Run for cover now or later? The impact of premiums, threats and deadlines on private health insurance in Australia," International Journal of Health Care Finance and Economics, Springer, vol. 8(4), pages 257-277, December.
  6. Royalty, Anne Beeson & Hagens, John, 2005. "The effect of premiums on the decision to participate in health insurance and other fringe benefits offered by the employer: evidence from a real-world experiment," Journal of Health Economics, Elsevier, vol. 24(1), pages 95-112, January.
  7. Abraham, Jean M. & Feldman, Roger & Carlin, Caroline & Christianson, Jon, 2006. "The effect of quality information on consumer health plan switching: Evidence from the Buyers Health Care Action Group," Journal of Health Economics, Elsevier, vol. 25(4), pages 762-781, July.
  8. Stan McMillen & Kathryn Parr & Xiumei Song & Brian Baird, 2004. "The Kerry-Bush Health Care Proposals: A Characterization and Comparison of their Impacts on Connecticut (Technical Appendix)," CCEA Studies 2004-06, University of Connecticut, Connecticut Center for Economic Analysis.

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