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Information and Consumer Choice: The Value of Publicized Health Plan Ratings

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  • Ginger Zhe Jin
  • Alan T. Sorensen

Abstract

We use data on the enrollment decisions of federal annuitants to estimate the influence of publicized ratings on health plan choice. We focus on the impact of ratings disseminated by the National Committee for Quality Assurance (NCQA), and use our estimates to calculate the value of the information. Our approach exploits a novel feature of the data%u2014the availability of nonpublic plan ratings%u2014to correct for a source of bias that is inherent in studies of consumer responsiveness to information on product quality: since publicized ratings are correlated with other quality signals known to consumers (but unobserved by researchers), the estimated influence of ratings is likely to be overstated. We control for this bias by comparing the estimated impact of publicized ratings to the estimated impact of ratings that were never disclosed. The results indicate that NCQA%u2019s plan ratings had a meaningful influence on individuals%u2019 choices, particularly for individuals choosing a plan for the first time. Although we estimate that a very small fraction of individual decisions were materially affected by the information, for those that were affected the implied utility gains are substantial.

Suggested Citation

  • Ginger Zhe Jin & Alan T. Sorensen, 2005. "Information and Consumer Choice: The Value of Publicized Health Plan Ratings," NBER Working Papers 11514, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:11514 Note: IO
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    References listed on IDEAS

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    1. Grossman, Sanford J, 1981. "The Informational Role of Warranties and Private Disclosure about Product Quality," Journal of Law and Economics, University of Chicago Press, vol. 24(3), pages 461-483, December.
    2. Beaulieu, Nancy Dean, 2002. "Quality information and consumer health plan choices," Journal of Health Economics, Elsevier, vol. 21(1), pages 43-63, January.
    3. Scanlon, Dennis P. & Chernew, Michael & McLaughlin, Catherine & Solon, Gary, 2002. "The impact of health plan report cards on managed care enrollment," Journal of Health Economics, Elsevier, vol. 21(1), pages 19-41, January.
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    Cited by:

    1. Pope, Devin G., 2009. "Reacting to rankings: Evidence from "America's Best Hospitals"," Journal of Health Economics, Elsevier, vol. 28(6), pages 1154-1165, December.

    More about this item

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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