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Plan choice, health insurance cost and premium sharing

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  • Kosteas, Vasilios D.
  • Renna, Francesco

Abstract

We develop a model of premium sharing for firms that offer multiple insurance plans. We assume that firms offer one low quality plan and one high quality plan. Under the assumption of wage rigidities we found that the employee's contribution to each plan is an increasing function of that plan's premium. The effect of the other plan's premium is ambiguous. We test our hypothesis using data from the Employer Health Benefit Survey. Restricting the analysis to firms that offer both HMO and PPO plans, we measure the amount of the premium passed on to employees in response to a change in both premiums. We find evidence of large and positive effects of the increase in the plan's premium on the amount of the premium passed on to employees. The effect of the alternative plan's premium is negative but statistically significant only for the PPO plans.

Suggested Citation

  • Kosteas, Vasilios D. & Renna, Francesco, 2014. "Plan choice, health insurance cost and premium sharing," Journal of Health Economics, Elsevier, vol. 35(C), pages 179-188.
    • Handle: RePEc:eee:jhecon:v:35:y:2014:i:c:p:179-188
    DOI: 10.1016/j.jhealeco.2014.03.002
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    References listed on IDEAS

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    1. Laurence C. Baker & Kenneth S. Corts, 1995. "The Effects of HMOs on Conventional Insurance Premiums: Theory and Evidence," NBER Working Papers 5356, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Liu, Yiyan & Jin, Ginger Zhe, 2015. "Employer contribution and premium growth in health insurance," Journal of Health Economics, Elsevier, vol. 39(C), pages 228-247.
    2. Vasilios D. Kosteas & Francesco Renna, 2018. "Out of Pocket Costs and Health Insurance Take-Up Rates," Applied Health Economics and Health Policy, Springer, vol. 16(3), pages 367-380, June.
    3. Koh, Kanghyock, 2018. "The Great Recession and Workers’ Health Benefits," Journal of Health Economics, Elsevier, vol. 58(C), pages 18-28.

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    More about this item

    Keywords

    Employer sponsored health insurance; Premium sharing; Multiple plans; Plan quality; Premium growth;
    All these keywords.

    JEL classification:

    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets

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