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

Author

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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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    1. Baicker, Katherine & Chernew, Michael E. & Robbins, Jacob A., 2013. "The spillover effects of Medicare managed care: Medicare Advantage and hospital utilization," Journal of Health Economics, Elsevier, vol. 32(6), pages 1289-1300.
    2. Buntin, Melinda Beeuwkes & Zaslavsky, Alan M., 2004. "Too much ado about two-part models and transformation?: Comparing methods of modeling Medicare expenditures," Journal of Health Economics, Elsevier, vol. 23(3), pages 525-542, May.
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    Cited by:

    1. repec:eee:jhecon:v:61:y:2018:i:c:p:111-133 is not listed on IDEAS
    2. repec:aea:jecper:v:31:y:2017:i:4:p:3-22 is not listed on IDEAS
    3. 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.
    4. Randall P. Ellis & Wenjia Zhu, 2016. "Health Plan Type Variations in Spells of Health-Care Treatment," American Journal of Health Economics, MIT Press, vol. 2(4), pages 399-430, Fall.
    5. repec:eee:jhecon:v:60:y:2018:i:c:p:90-97 is not listed on IDEAS
    6. 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.
    7. repec:aea:aejpol:v:9:y:2017:i:2:p:91-123 is not listed on IDEAS
    8. 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.
    9. 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.
    10. repec:zbw:rwirep:0545 is not listed on IDEAS
    11. 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.
    12. 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.
    13. 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.
    14. 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.

    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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