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

Listed author(s):
  • 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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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
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. 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.
  2. 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.
  3. 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.
  4. Fitzpatrick, Maria D., 2014. "Retiree health insurance for public school employees: Does it affect retirement?," Journal of Health Economics, Elsevier, vol. 38(C), pages 88-98.
  5. Clark, Robert L. & Morrill, Melinda Sandler & Vanderweide, David, 2014. "The effects of retiree health insurance plan characteristics on retirees’ choice and employers’ costs," Journal of Health Economics, Elsevier, vol. 38(C), pages 119-129.
  6. Robert L. Clark & Melinda Sandler Morrill, 2010. "Retiree Health Plans in the Public Sector," Books, Edward Elgar Publishing, number 13688.
  7. Cutler, David & Lincoln, Bryan & Zeckhauser, Richard, 2010. "Selection stories: Understanding movement across health plans," Journal of Health Economics, Elsevier, vol. 29(6), pages 821-838, December.
  8. Robert L. Clark, 2010. "Retiree Health Plans for Public School Teachers after GASB 43 and 45," Education Finance and Policy, MIT Press, vol. 5(4), pages 438-462, October.
  9. Robert L. Clark, 2009. "Will Public Sector Retiree Health Benefit Plans Survive? Economic and Policy Implications of Unfunded Liabilities," American Economic Review, American Economic Association, vol. 99(2), pages 533-537, May.
  10. 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.
  11. 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.
  12. 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.
  13. Nyce, Steven & Schieber, Sylvester J. & Shoven, John B. & Slavov, Sita Nataraj & Wise, David A., 2013. "Does retiree health insurance encourage early retirement?," Journal of Public Economics, Elsevier, vol. 104(C), pages 40-51.
  14. 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.
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