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Controlling Health Care Costs through Limited Network Insurance Plans: Evidence from Massachusetts State Employees

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  • Jonathan Gruber
  • Robin McKnight

Abstract

We investigate the impact of limited network insurance plans in the context of the Massachusetts Group Insurance Commission (GIC), the insurance plan for state employees. Our quasi-experimental analysis examines the introduction of a major financial incentive to choose limited network plans that affected a subset of GIC enrollees. We find that enrollees are very price sensitive in their decision to enroll in limited network plans. Those who switched spent almost 40 percent less on medical care. This reflects reductions in the quantity of services and prices paid per service. The spending reductions came from specialist and hospital care, while spending on primary care rose. (JEL G22, H75, I11, I13, J45)

Suggested Citation

  • Jonathan Gruber & Robin McKnight, 2016. "Controlling Health Care Costs through Limited Network Insurance Plans: Evidence from Massachusetts State Employees," American Economic Journal: Economic Policy, American Economic Association, vol. 8(2), pages 219-250, May.
  • Handle: RePEc:aea:aejpol:v:8:y:2016:i:2:p:219-50
    Note: DOI: 10.1257/pol.20140335
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Jonathan Gruber, 2017. "Delivering Public Health Insurance through Private Plan Choice in the United States," Journal of Economic Perspectives, American Economic Association, vol. 31(4), pages 3-22, Fall.
    2. Higuera, Lucas & Carlin, Caroline S. & Dowd, Bryan, 2018. "Narrow provider networks and willingness to pay for continuity of care and network breadth," Journal of Health Economics, Elsevier, vol. 60(C), pages 90-97.
    3. Leemore Dafny & Christopher Ody & Matt Schmitt, 2017. "When Discounts Raise Costs: The Effect of Copay Coupons on Generic Utilization," American Economic Journal: Economic Policy, American Economic Association, vol. 9(2), pages 91-123, May.
    4. Keith Marzilli Ericson & Amanda Starc, 2015. "Measuring Consumer Valuation of Limited Provider Networks," American Economic Review, American Economic Association, vol. 105(5), pages 115-119, May.
    5. Christian Bünnings & Hendrik Schmitz & Harald Tauchmann & Nicolas R. Ziebarth, 2015. "How Health Plan Enrollees Value Prices Relative to Supplemental Benefits and Service Quality," Ruhr Economic Papers 0545, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    6. repec:zbw:rwirep:0545 is not listed on IDEAS
    7. Determann, Domino & Lambooij, Mattijs S. & de Bekker-Grob, Esther W. & Hayen, Arthur P. & Varkevisser, Marco & Schut, Frederik T. & Wit, G. Ardine de, 2016. "What health plans do people prefer? The trade-off between premium and provider choice," Social Science & Medicine, Elsevier, vol. 165(C), pages 10-18.
    8. Mark Shepard, 2016. "Hospital Network Competition and Adverse Selection: Evidence from the Massachusetts Health Insurance Exchange," NBER Working Papers 22600, National Bureau of Economic Research, Inc.
    9. Evan Gee & Craig Peters & Jeffrey M. Wilder, 2019. "The Year in Review: Economics at the Antitrust Division, 2018–2019," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 55(4), pages 537-550, December.
    10. Bunnings, C,; & Schmitz, H,; & Tauchmann, H,; & Ziebarth, N.R,;, 2015. "How Health Plan Enrollees Value Prices Relative to Supplemental Benefits and Service Quality," Health, Econometrics and Data Group (HEDG) Working Papers 15/02, HEDG, c/o Department of Economics, University of York.
    11. Aouad, Marion & Brown, Timothy T. & Whaley, Christopher M., 2019. "Reference pricing: The case of screening colonoscopies," Journal of Health Economics, Elsevier, vol. 65(C), pages 246-259.
    12. van den Broek-Altenburg, Eline M. & Atherly, Adam J., 2020. "The relation between selective contracting and healthcare expenditures in private health insurance plans in the United States," Health Policy, Elsevier, vol. 124(2), pages 174-182.
    13. Whaley, Christopher M. & Brown, Timothy T., 2018. "Firm responses to targeted consumer incentives: Evidence from reference pricing for surgical services," Journal of Health Economics, Elsevier, vol. 61(C), pages 111-133.
    14. Brett Lissenden, 2019. "The effect of cancer diagnosis on switching health insurance in medicare," Health Economics, John Wiley & Sons, Ltd., vol. 28(3), pages 339-349, March.
    15. Nosal, K.;, 2017. "Two-Sided Matching in Physician-Insurer Networks: Evidence from Medicare Advantage," Health, Econometrics and Data Group (HEDG) Working Papers 17/19, HEDG, c/o Department of Economics, University of York.
    16. Randall P. Ellis & Wenjia Zhu, 2016. "Health Plan Type Variations in Spells of Health-Care Treatment," American Journal of Health Economics, University of Chicago Press, vol. 2(4), pages 399-430, Fall.
    17. Michael Geruso & Timothy J. Layton & Jacob Wallace, 2020. "Are All Managed Care Plans Created Equal? Evidence from Random Plan Assignment in Medicaid," NBER Working Papers 27762, National Bureau of Economic Research, Inc.
    18. Atwood, Alicia & Lo Sasso, Anthony T., 2016. "The effect of narrow provider networks on health care use," Journal of Health Economics, Elsevier, vol. 50(C), pages 86-98.
    19. Drake, Coleman, 2019. "What are consumers willing to pay for a broad network health plan?: Evidence from covered California," Journal of Health Economics, Elsevier, vol. 65(C), pages 63-77.

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    More about this item

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets

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