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The Effects of Retiree Health Insurance Plan Characteristics on Retirees' Choice and Employers' Costs

  • Robert Clark
  • Melinda Morrill
  • David Vanderweide

To moderate the rate of growth of retiree health insurance costs, employers can modify plans and move retirees into less expensive plans. We examine policy modifications implemented by the North Carolina State Health Plan. We investigate whether incentives produce the desired plan elections and whether these changes, along with cost shifting, produce the expected reductions in cost growth. Using individual-level administrative data, along with aggregated data on expenditures for retirees, we estimate the effects of the introduction and subsequent repeal of a Comprehensive Wellness Initiative for non-Medicare eligible retirees, as well as increases in coinsurance and copayments and the introduction of a premium for all retirees. Over a third of non-Medicare retirees shifted into the least generous plan between June 2009 and December 2012. The level effects on annual costs and unfunded accrued liabilities were relatively modest, but growth rates were diminished. Increases in the retiree premiums reduced projected costs.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19566.

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Date of creation: Oct 2013
Date of revision:
Publication status: published as The Effects of Retiree Health Insurance Plan Characteristics on Retirees' Choice and Employers' Costs , Robert Clark, Melinda Morrill, David Vanderweide. in State and Local Health Plans for Active and Retired Public Employees , Clark and Newhouse. 2014
Handle: RePEc:nbr:nberwo:19566
Note: HE LS PE
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  1. Cutler, David & Lincoln, Bryan & Zeckhauser, Richard, 2009. "Selection Stories: Understanding Movement across Health Plans," Working Paper Series rwp09-022, Harvard University, John F. Kennedy School of Government.
  2. Robert Clark & Melinda S. Morrill, 2010. "The Funding Status of Retiree Health Plans in the Public Sector," NBER Working Papers 16450, National Bureau of Economic Research, Inc.
  3. Maria D. Fitzpatrick, 2013. "Retiree Health Insurance for Public School Employees: Does it Affect Retirement?," CESifo Working Paper Series 4415, CESifo Group Munich.
  4. 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.
  5. John B. Shoven & Sita Slavov, 2013. "The Role of Retiree Health Insurance in the Early Retirement of Public Sector Employees," NBER Working Papers 19563, National Bureau of Economic Research, Inc.
  6. Christina Robinson & Robert Clark, 2010. "Retiree Health Insurance and Disengagement from a Career Job," Journal of Labor Research, Springer, vol. 31(3), pages 247-262, September.
  7. 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.
  8. Robert L. Clark & Melinda Sandler Morrill, 2010. "Retiree Health Plans in the Public Sector," Books, Edward Elgar Publishing, number 13688, 10.
  9. 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.
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