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Price and the Health Plan Choices of Retirees

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  • Thomas C. Buchmueller

Abstract

This study analyzes health plan choices of retirees in an employer-sponsored health benefits program that resembles "premium support" models proposed for Medicare. In this program, out-of-pocket premiums depend on when an individual retired and his or her years of service as of that date. Since this price variation is exogenous to unobserved plan attributes and retiree characteristics, it possible to obtain unbiased premium elasticity estimates. The results indicate a significantly negative effect of premiums. The implied elasticities are at the low end of the range found in previous studies on active employees.

Suggested Citation

  • Thomas C. Buchmueller, 2005. "Price and the Health Plan Choices of Retirees," NBER Working Papers 11395, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:11395
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    References listed on IDEAS

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    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.
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    6. Roger Feldman & Michael Finch & Bryan Dowd & Steven Cassou, 1989. "The Demand for Employment-Based Health Insurance Plans," Journal of Human Resources, University of Wisconsin Press, vol. 24(1), pages 115-142.
    7. Daniel McFadden & Kenneth Train, 2000. "Mixed MNL models for discrete response," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 15(5), pages 447-470.
    8. Michael Chernew & Gautam Gowrisankaran & Dennis P. Scanlon, 2002. "Learning and the value of information: the case of health plan report cards," Working Paper Series 2002-17, Federal Reserve Bank of San Francisco.
    9. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521747387.
    10. Harris, Katherine M. & Keane, Michael P., 1998. "A model of health plan choice:: Inferring preferences and perceptions from a combination of revealed preference and attitudinal data," Journal of Econometrics, Elsevier, vol. 89(1-2), pages 131-157, November.
    11. Beaulieu, Nancy Dean, 2002. "Quality information and consumer health plan choices," Journal of Health Economics, Elsevier, vol. 21(1), pages 43-63, January.
    12. Cutler David M., 2003. "Employee Costs and the Decline in Health Insurance Coverage," Forum for Health Economics & Policy, De Gruyter, vol. 6(1), pages 1-29, January.
    13. Samuelson, William & Zeckhauser, Richard, 1988. "Status Quo Bias in Decision Making," Journal of Risk and Uncertainty, Springer, vol. 1(1), pages 7-59, March.
    14. 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.
    15. 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.
    16. Michael Chernew & Gautam Gowrisankaran & Dennis P. Scanlon, 2001. "Learning and the Value of Information: Evidence From Health Plan Report Cards," NBER Working Papers 8589, National Bureau of Economic Research, Inc.
    17. Gruber, Jonathan & Washington, Ebonya, 2005. "Subsidies to employee health insurance premiums and the health insurance market," Journal of Health Economics, Elsevier, vol. 24(2), pages 253-276, March.
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    Cited by:

    1. Lieke H. H. M. Boonen & Trea Laske-Aldershof & Frederik T. Schut, 2016. "Switching health insurers: the role of price, quality and consumer information search," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 17(3), pages 339-353, April.
    2. Pilny, Adam & Wübker, Ansgar & Ziebarth, Nicolas R., 2017. "Introducing risk adjustment and free health plan choice in employer-based health insurance: Evidence from Germany," Journal of Health Economics, Elsevier, vol. 56(C), pages 330-351.
    3. Schmitz, Hendrik & Ziebarth, Nicolas R., 2011. "In Absolute or Relative Terms? How Framing Prices Affects the Consumer Price Sensitivity of Health Plan Choice," IZA Discussion Papers 6241, Institute for the Study of Labor (IZA).
    4. Katherine Ho, 2006. "The welfare effects of restricted hospital choice in the US medical care market," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(7), pages 1039-1079.
    5. de Freitas, Maurício Assuero Lima & Stamford da Silva, Alexandre, 2013. "The influence of the healthcare system on optimal economic growth," Economic Modelling, Elsevier, vol. 35(C), pages 734-742.
    6. Jonas B. Pendzialek & Dusan Simic & Stephanie Stock, 2016. "Differences in price elasticities of demand for health insurance: a systematic review," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 17(1), pages 5-21, January.
    7. Rachel Kreier & Bhaswati Sengupta, 2015. "Income, Health, and the Value of Preserving Options," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 43(4), pages 431-448, December.
    8. Hendrik Schmitz & Nicolas R. Ziebarth, 2011. "In Absolute or Relative Terms? How Framing Prices Affects the Consumer Price Sensitivity of," Ruhr Economic Papers 0304, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    9. Rudy Douven & Marco Ligthart & H. Lieverdink & I. Vermeulen, 2007. "Measuring annual price elasticities in Dutch health insurance; a new method," CPB Discussion Paper 90, CPB Netherlands Bureau for Economic Policy Analysis.
    10. Keane, Michael & Stavrunova, Olena, 2016. "Adverse selection, moral hazard and the demand for Medigap insurance," Journal of Econometrics, Elsevier, vol. 190(1), pages 62-78.
    11. 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.
    12. 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.
    13. 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.
    14. Marco Varkevisser & Stéphanie Geest & Frederik Schut, 2010. "Assessing hospital competition when prices don’t matter to patients: the use of time-elasticities," International Journal of Health Economics and Management, Springer, vol. 10(1), pages 43-60, March.
    15. repec:zbw:rwirep:0304 is not listed on IDEAS
    16. Jonas Pendzialek & Dusan Simic & Stephanie Stock, 2016. "Differences in price elasticities of demand for health insurance: a systematic review," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 17(1), pages 5-21, January.
    17. Schmitz, Hendrik & Ziebarth, Nicolas R., 2011. "In Absolute or Relative Terms? How Framing Prices Affects the Consumer Price Sensitivity of," Ruhr Economic Papers 304, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    18. Florian Heiss & Daniel McFadden & Joachim Winter, 2008. "Mind the Gap! Consumer Perceptions and Choices," MEA discussion paper series 08156, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    19. Florian Heiss & Daniel McFadden & Joachim Winter, 2010. "Mind the Gap! Consumer Perceptions and Choices of Medicare Part D Prescription Drug Plans," NBER Chapters,in: Research Findings in the Economics of Aging, pages 413-481 National Bureau of Economic Research, Inc.
    20. repec:zbw:rwirep:0545 is not listed on IDEAS
    21. Keane, Michael & Stavrunova, Olena, 2016. "Adverse selection, moral hazard and the demand for Medigap insurance," Journal of Econometrics, Elsevier, vol. 190(1), pages 62-78.

    More about this item

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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