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The Effects of Offering Health Plan Choice within Employment-Based Purchasing Groups

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  • M. Kate Bundorf
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    Abstract

    Over the last two decades, employers have increasingly offered workers a choice of health plans. The availability of choice has the potentially beneficial effects of lowering the cost and increasing the quality of health care through greater competition among health plans for enrollees as well as allowing consumers to enroll in the type of coverage that most closely matches their preferences. On the other hand, concerns about the potential for adverse selection within employment-based purchasing in response to the availability of choice exist. In this paper, I examine the effects of offering choice in employment-based purchasing groups on access to and the cost of employer-sponsored coverage. I find that greater availability of choice was associated with a reduction in the premium of employer-sponsored coverage and an increase in the proportion of workers covered by the plans offered by employers. However, most of the premium reductions were due to a shift from family to single coverage within employment-based purchasing groups and a reduction in the generosity of the plans in which employees were enrolled. The results are not consistent with the availability of choice leading to lower premiums through greater competition among plans for workers.

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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9996.

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    Date of creation: Sep 2003
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    Publication status: published as M. Kate Bundorf, 2010. "The Effects of Offering Health Plan Choice Within Employment-Based Purchasing Groups," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 77(1), pages 105-127.
    Handle: RePEc:nbr:nberwo:9996

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    1. Kate Bundorf, M., 2002. "Employee demand for health insurance and employer health plan choices," Journal of Health Economics, Elsevier, Elsevier, vol. 21(1), pages 65-88, January.
    2. Heckman, James J, 1978. "Dummy Endogenous Variables in a Simultaneous Equation System," Econometrica, Econometric Society, Econometric Society, vol. 46(4), pages 931-59, July.
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    7. Gruber, Jonathan, 1994. "The Incidence of Mandated Maternity Benefits," American Economic Review, American Economic Association, American Economic Association, vol. 84(3), pages 622-41, June.
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    12. Feldman, Roger & Dowd, Bryan, 2000. "Risk segmentation: goal or problem?," Journal of Health Economics, Elsevier, Elsevier, vol. 19(4), pages 499-512, July.
    13. Patricia M. Danzon, 1990. "Mandated Employment-Based Health Insurance:Incidence and Efficiency Effects," University of Chicago - George G. Stigler Center for Study of Economy and State, Chicago - Center for Study of Economy and State 60, Chicago - Center for Study of Economy and State.
    14. Glied, Sherry, 2000. "Managed care," Handbook of Health Economics, Elsevier, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 13, pages 707-753 Elsevier.
    15. Gerald S. Goldstein & Mark V. Pauly, 1976. "Group Health Insurance as a Local Public Good," NBER Chapters, in: The Role of Health Insurance in the Health Services Sector, pages 73-114 National Bureau of Economic Research, Inc.
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