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Selection Stories: Understanding Movement Across Health Plans


  • Zeckhauser, Richard Jay
  • Cutler, David M.
  • Lincoln, Bryan


This study assesses the factors influencing the movement of people across health plans. We distinguish three types of cost-related transitions: adverse selection, the movement of the less healthy to more generous plans; adverse retention, the tendency for people to stay where they are when they get sick; and aging in place, where lack of all movement makes plans with initially older enrollees increase in cost over time. Using data from the Group Insurance Commission in Massachusetts, we show that aging in place and adverse selection are both quantitatively important. Each can materially impact equilibrium enrollments, especially when premiums to enrollees reflect these costs.

Suggested Citation

  • Zeckhauser, Richard Jay & Cutler, David M. & Lincoln, Bryan, 2009. "Selection Stories: Understanding Movement Across Health Plans," Scholarly Articles 4449102, Harvard Kennedy School of Government.
  • Handle: RePEc:hrv:hksfac:4449102

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    References listed on IDEAS

    1. Strombom, Bruce A. & Buchmueller, Thomas C. & Feldstein, Paul J., 2002. "Switching costs, price sensitivity and health plan choice," Journal of Health Economics, Elsevier, vol. 21(1), pages 89-116, January.
    2. Altman, Daniel & Cutler, David & Zeckhauser, Richard, 2003. "Enrollee mix, treatment intensity, and cost in competing indemnity and HMO plans," Journal of Health Economics, Elsevier, vol. 22(1), pages 23-45, January.
    3. David M. Cutler & Richard J. Zeckhauser, 1998. "Adverse Selection in Health Insurance," NBER Chapters,in: Frontiers in Health Policy Research, Volume 1, pages 1-32 National Bureau of Economic Research, Inc.
    4. Cutler, David M. & Zeckhauser, Richard J., 2000. "The anatomy of health insurance," Handbook of Health Economics,in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 11, pages 563-643 Elsevier.
    5. Selden, Thomas M., 1999. "Premium subsidies for health insurance: excessive coverage vs. adverse selection," Journal of Health Economics, Elsevier, vol. 18(6), pages 709-725, December.
    6. M. Kate Bundorf & Jonathan Levin & Neale Mahoney, 2012. "Pricing and Welfare in Health Plan Choice," American Economic Review, American Economic Association, vol. 102(7), pages 3214-3248, December.
    7. Michael Rothschild & Joseph Stiglitz, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, Oxford University Press, vol. 90(4), pages 629-649.
    8. Samuelson, William & Zeckhauser, Richard, 1988. "Status Quo Bias in Decision Making," Journal of Risk and Uncertainty, Springer, vol. 1(1), pages 7-59, March.
    9. Matthew L. Maciejewski & Bryan Dowd & Heidi O'Connor, 2004. "Multiple Prior Years of Health Expenditures and Medicare Health Plan Choice," International Journal of Health Economics and Management, Springer, vol. 4(3), pages 247-261, September.
    10. David M. Cutler & Sarah J. Reber, 1998. "Paying for Health Insurance: The Trade-Off between Competition and Adverse Selection," The Quarterly Journal of Economics, Oxford University Press, vol. 113(2), pages 433-466.
    11. Anne Beeson Royalty & Neil Solomon, 1999. "Health Plan Choice: Price Elasticities in a Managed Competition Setting," Journal of Human Resources, University of Wisconsin Press, vol. 34(1), pages 1-41.
    12. McClellan, Mark & Cutler, David & Newhous, Joseph P., 2000. "How Does Managed Care Do It?," Scholarly Articles 2643884, Harvard University Department of Economics.
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    Cited by:

    1. Christiansen, Marcus & Eling, Martin & Schmidt, Jan-Philipp & Zirkelbach, Lorenz, 2012. "Who is Changing Health Insurance Coverage? Empirical Evidence on Policyholder Dynamics," Working Papers on Finance 1223, University of St. Gallen, School of Finance.
    2. Frech, Ted E & Smith, Michael P, 2015. "Anatomy of a Slow-Motion Health Insurance Death Spiral," University of California at Santa Barbara, Economics Working Paper Series qt0w64d54d, Department of Economics, UC Santa Barbara.
    3. Jacob Glazer & Thomas G. McGuire & Julie Shi, 2016. "Risk Adjustment of Health Plan Payments to Correct Inefficient Plan Choice from Adverse Selection," NBER Chapters,in: Measuring and Modeling Health Care Costs, pages 379-418 National Bureau of Economic Research, Inc.
    4. Michiel Bijlsma & Jan Boone & Gijsbert Zwart, 2014. "Competition leverage: how the demand side affects optimal risk adjustment," RAND Journal of Economics, RAND Corporation, vol. 45(4), pages 792-815, December.
    5. Marcus C. Christiansen & Martin Eling & Jan-Philipp Schmidt & Lorenz Zirkelbach, 2016. "Who is Changing Health Insurance Coverage? Empirical Evidence on Policyholder Dynamics," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 83(2), pages 269-300, June.
    6. Clark, Robert L. & Morrill, Melinda Sandler & Vanderweide, David, 2014. "The effects of retiree health insurance plan characteristics on retirees’ choice and employers’ costs," Journal of Health Economics, Elsevier, vol. 38(C), pages 119-129.
    7. Wuppermann, Amelie Catherine, 2011. "Empirical Essays in Health and Education Economics," Munich Dissertations in Economics 13187, University of Munich, Department of Economics.
    8. Benjamin R. Handel, 2011. "Adverse Selection and Switching Costs in Health Insurance Markets: When Nudging Hurts," NBER Working Papers 17459, National Bureau of Economic Research, Inc.
    9. McGuire, Thomas G. & Newhouse, Joseph P. & Normand, Sharon-Lise & Shi, Julie & Zuvekas, Samuel, 2014. "Assessing incentives for service-level selection in private health insurance exchanges," Journal of Health Economics, Elsevier, vol. 35(C), pages 47-63.

    More about this item

    JEL classification:

    • I0 - Health, Education, and Welfare - - General
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health


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