Consumers' Sensitivity to Health Plan Premiums: Evidence from A Natural Experiment in California

Health Affairs

Volumn 15, Issue 1, 1996, Pages

  Buchmueller, Thomas C ^a   Feldstein, Paul J ^a  

^a UNIVERSITY OF CALIFORNIA   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

ARTICLE; CONSUMER; COST CONTROL; ECONOMICS; HEALTH INSURANCE; HUMAN; UNITED STATES;

CALIFORNIA; CONSUMER SATISFACTION; COST SAVINGS; HEALTH BENEFIT PLANS, EMPLOYEE; HUMANS; MANAGED COMPETITION;

EID: 1542534804     PISSN: 02782715     EISSN: None     Source Type: Journal    
DOI: 10.1377/hlthaff.15.1.143     Document Type: Article

References (12)

1. J. Newhouse et al., "Are Fee-for-Service Costs Increasing Faster than HMO Costs?" Medical Care (October 1985): 960-966.
2. A.C. Enthoven, "Why Managed Care Has Failed to Contain Health Costs," Health Affairs (Fall 1993): 27-43.
3. See A.C. Enthoven, "Health Care Costs: A Moral and Economic Problem," California Management Review (Winter 1993): 134-151.
4. The California state budget crisis, which had a negative impact on the UC budget and faculty salaries, was an important impetus for the policy change.
5. T.C. Buchmueller and P.J. Feldstein, "The Effect of Price on Switching among Health Plans" (Working Paper, Graduate School of Management, University of California, Irvine, May 1995).
6. There were two high-option indemnity plans. The lower figure was the amount charged for single coverage in the plan offered to employees at the Los Alamos National Laboratory; the higher figure was for family coverage under Prudential High Option, the indemnity plan offered at the California locations.
7. Switching rates are calculated as the percentage of 1993 enrollees who switched to another plan in 1994. Enrollees who left a plan because they left UC are not included in either the numerator or the denominator.
8. See, for example, S. Long, R. Settle, and C. Wrightson, "Employee Premiums, Availability of Alternative Plans, and HMO Disenrollment," Medical Care (October 1988): 927-938; and J. Price and J. Mays, "Selection and the Competitive Standing of Health Plans in a Multiple-Choice, Multiple Insurer Market," in Biased Selection in Health Care Markets, Advances in Health Economics and Health Services Research, vol. 6, ed. R.M. Scheffler and L.F. Rossiter (Greenwich, Conn.: JAI Press, 1985), 127-148.
9. See, for example, S. Long, R. Settle, and C. Wrightson, "Employee Premiums, Availability of Alternative Plans, and HMO Disenrollment," Medical Care (October 1988): 927-938; and J. Price and J. Mays, "Selection and the Competitive Standing of Health Plans in a Multiple-Choice, Multiple Insurer Market," in Biased Selection in Health Care Markets, Advances in Health Economics and Health Services Research, vol. 6, ed. R.M. Scheffler and L.F. Rossiter (Greenwich, Conn.: JAI Press, 1985), 127-148.
10. The binary dependent variable equals one for employees who switched plans between 1993 and 1994. Three price variables are included on the right-hand side: a dummy variable equaling one for all employees facing any increase in monthly premium contributions, the dollar increase in the monthly contribution rate, and this increase squared. The coefficients on all three price variables are statistically significant at the 1 percent level. Additional control variables are age, sex, UC salary, years in current plan, coverage type (family, two-party, or single), geographic location, and a plan-specific measure of enrollee satisfaction. See Buchmueller and Feldstein, "The Effect of Price on Switching among Health Plans," for more details on the regression results and simulation methodology.
11. Previous research also suggests that fee-for-service enrollees are less sensitive to price than HMO enrollees are. See R. Feldman et al., "The Demand for Employment-Based Health Insurance Plans," Journal of Human Resources 24, no. 1 (1989): 115-142.
12. Long et al., "Employee Premiums, Availability of Alternative Plans, and HMO Disenrollment."