Consumer Decision Making In The Individual Health Insurance Market

Abstract

This paper summarizes the results from a study of consumer decision making in California's individual health insurance market. We conclude that price subsidies will have only modest effects on participation and that efforts to reduce nonprice barriers might be just as effective. We also find that there is substantial pooling in the individual market and that it increases over time because people who become sick can continue coverage without new underwriting. Finally, we show that people prefer more-generous benefits and that it is difficult to induce people in poor health to enroll in high-deductible health plans. [Health Affairs 25 (2006): w226-w234

Let Them Have Choice: Gains from Shifting Away from Employer-Sponsored Health Insurance and Toward an Individual Exchange

“…Using the median ξ emcjt reduces the noise caused by particularly high or low estimated unobserved quality for particular employers, although in practice this has very little effect on our estimates. 23 The premiums in both the observed and the counterfactual scenarios are the values predicted by the hedonic regression described above. We incorporate employer subsidies to health insurance by assuming budget neutrality for employers: for every employer-market-year, spending equals actual employer contributions to premiums in the original data.…”

“…Given most employers in our data appear to pay the same percentage of premium across plans (the median is 79%) rather than the same dollar amount, we retain this feature in our simulations. Thus, in each 23 There is one exception to these rules. If an employer offers a plan to its employees in the data, in the counterfactual those employees are offered exactly the same plan design, with the same unobserved quality, even if it is offered by fewer than three employers and even if there are multiple plans in the MCPY.…”

The Welfare Effects of Long-Term Health Insurance Contracts

“…where P (zj t = s; C y t+1 ; c) is the probability that, starting in health state t = s in period t; the health state transitions ( t+1 ; :::; ) from period t to period are such that = z and c y t 0 ( t 0 ) c for all t 0 2 ft + 1; :::; g. 28 The …rst term in curly brackets in (7) is the expected pro…t in period t given the initial consumption guarantee c, while the second term in curly brackets is the expected continuation pro…t and uses the fact that starting at the …rst instance at which the consumer's health state is such that c y ( ) > c (i.e., the lapsation constraint binds), the insurer's continuation payo¤ is zero. We continue in this iterative manner until we have derived C y 1 , whose …rst row gives the initial consumption guarantees o¤ered in period-1 to consumers in each of the seven possible period 1 health states.…”

Consumer Decisionmaking in the Health Care Marketplace

“…Cutler and Zeckhauser (2000) provided an overview of the economics literature on health insurance that is still valid today. Although this is a broad literature and beyond the scope of this review, consumers are sensitive to out-of-pocket costs, especially premiums (Feldman et al, 1989;Cutler and Reber, 1998;Royalty and Solomon, 1999;Strombom, Buchmueller, and Feldstein, 2002;Nichols et al, 2004;Marquis, Buntin, Escarce, Kapur, et al, 2006;Marquis, Buntin, Escarce, and Kapur, 2007;Abraham et al, 2006;Buchmueller, 2006;J. Schwartz et al, 2013;Politi et al, 2014).…”

“…The marketplaces could establish default settings to correlate with public policy goals set by the U.S. Department of Health and Human Services to generate both individual and public value in the long term. Some studies illustrate that people often wish to choose not to choose, preferring to delegate decisionmaking to a trusted person (e.g., their employers) to help them select a health insurance plan (Maher, 2012;Day and Nadash, 2012;Marquis, Buntin, Escarce, Kapur, et al, 2006). In the current setting, the default is that people are uninsured, which might not be in the best interests of the consumer or public policy goals.…”