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

  • Robert Clark
  • Melinda Morrill
  • David Vanderweide
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    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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    File URL: http://www.nber.org/papers/w19566.pdf
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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
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    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. Robert L. Clark & Melinda Sandler Morrill, 2010. "Retiree Health Plans in the Public Sector," Books, Edward Elgar, number 13688, December.
    2. Maria D. Fitzpatrick, 2013. "Retiree Health Insurance for Public School Employees: Does it Affect Retirement?," CESifo Working Paper Series 4415, CESifo Group Munich.
    3. Shoven, John B. & Slavov, Sita Nataraj, 2014. "The role of retiree health insurance in the early retirement of public sector employees," Journal of Health Economics, Elsevier, vol. 38(C), pages 99-108.
    4. David M. Cutler & Sarah Reber, 1996. "Paying for Health Insurance: The Tradeoff between Competition and Adverse Selection," NBER Working Papers 5796, National Bureau of Economic Research, Inc.
    5. Rothschild, Michael & Stiglitz, Joseph E, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 630-49, November.
    6. 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.
    7. Zeckhauser, Richard Jay & Cutler, David M. & Lincoln, Bryan, 2009. "Selection Stories: Understanding Movement Across Health Plans," Scholarly Articles 4449102, Harvard Kennedy School of Government.
    8. Clark, Robert L. & Morrill, Melinda Sandler, 2011. "The funding status of retiree health plans in the public sector," Journal of Pension Economics and Finance, Cambridge University Press, vol. 10(02), pages 291-314, April.
    9. 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.
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