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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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    3. David M. Cutler, 2003. "Employee Costs and the Decline in Health Insurance Coverage," NBER Chapters,in: Frontiers in Health Policy Research, Volume 6, pages 27-54 National Bureau of Economic Research, Inc.
    4. Jessica Vistnes & Thomas Selden, 2011. "Premium growth and its effect on employer-sponsored insurance," International Journal of Health Economics and Management, Springer, vol. 11(1), pages 55-81, March.
    5. 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.
    6. Shore-Sheppard, Lara & Buchmueller, Thomas C. & Jensen, Gail A., 2000. "Medicaid and crowding out of private insurance: a re-examination using firm level data," Journal of Health Economics, Elsevier, vol. 19(1), pages 61-91, January.
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    8. 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.
    9. Jessica Vistnes & Michael Morrisey & Gail Jensen, 2006. "Employer choices of family premium sharing," International Journal of Health Economics and Management, Springer, vol. 6(1), pages 25-47, March.
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    11. Benjamin Sommers, 2005. "Who Really Pays for Health Insurance? The Incidence of Employer-Provided Health Insurance with Sticky Nominal Wages," International Journal of Health Economics and Management, Springer, vol. 5(1), pages 89-118, January.
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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. repec:spr:aphecp:v:16:y:2018:i:3:d:10.1007_s40258-018-0388-4 is not listed on IDEAS
    3. repec:eee:jhecon:v:58:y:2018:i:c:p:18-28 is not listed on IDEAS

    More about this item

    Keywords

    Employer sponsored health insurance; Premium sharing; Multiple plans; Plan quality; Premium growth;

    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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