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The Impact of Tort Reform on Employer-Sponsored Health Insurance Premiums

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  • Ronen Avraham
  • Leemore S. Dafny
  • Max M. Schanzenbach

Abstract

We evaluate the effect of tort reform on employer-sponsored health insurance premiums by exploiting state-level variation in the timing of reforms. Using a dataset of healthplans representing over 10 million Americans annually between 1998 and 2006, we find that caps on non-economic damages, collateral source reform, and joint and several liability reform reduce premiums by 1 to 2 percent each. These reductions are concentrated in PPOs rather than HMOs, suggesting that can HMOs can reduce "defensive" healthcare costs even absent tort reform. The results are the first direct evidence that tort reform reduces healthcare costs in aggregate; prior research has focused on particular medical conditions.

Suggested Citation

  • Ronen Avraham & Leemore S. Dafny & Max M. Schanzenbach, 2009. "The Impact of Tort Reform on Employer-Sponsored Health Insurance Premiums," NBER Working Papers 15371, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:15371
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    References listed on IDEAS

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    Cited by:

    1. Arab Naz & Umar Daraz & Waseem Khan & Qaisar Khan & Tariq Khan & Anwar Alam & Irum Mughal, 2013. "Human’s Complexity and Man’s Atrocity: Causes Of Medical Malpractices among Pakhtuns of Pakistan," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 3(3), pages 286-297, March.
    2. Gomez, Fernando & Penalva, Jose, 2015. "Tort reform and the theory of coordinating tort and insurance," International Review of Law and Economics, Elsevier, vol. 43(C), pages 83-97.
    3. Congressional Budget Office, 2010. "Selected CBO Publications Related to Health Care Legislation, 2009-2010," Reports 21993, Congressional Budget Office.
    4. Brian K. Chen & Chun‐Yuh Yang, 2014. "Increased Perception of Malpractice Liability and the Practice of Defensive Medicine," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 11(3), pages 446-476, September.
    5. Toshiaki Iizuka, 2013. "Does Higher Malpractice Pressure Deter Medical Errors?," Journal of Law and Economics, University of Chicago Press, vol. 56(1), pages 161-188.
    6. Congressional Budget Office, 2010. "Selected CBO Publications Related to Health Care Legislation, 2009-2010," Reports 21993, Congressional Budget Office.

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    More about this item

    JEL classification:

    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics

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