Consumers' sensitivity to health plan premiums: evidence from a natural experiment in California.
A recent policy change by the University of California (UC) provides a unique natural experiment for investigating how consumers respond to financial incentives when choosing health plans. In 1994 UC went from a premium contribution policy that subsidized more costly plans to a policy of contributing a constant dollar amount. As a result, employee premium contributions increased for roughly one-third of university employees. The response to this change in relative prices was strong. Whereas only 5 percent of employees facing constant premium contributions switched plans, roughly one-quarter of those facing premium contribution increases of less than $10 per month switched to lower-cost plans. Higher price increases led to even greater rates of plan switching.
Buchmueller
T C
TC
Graduate School of Management, University of California, Irvine, USA.
Feldstein
P J
PJ
D002140:California; D003258:Consumer Behavior / Q000191:economics*; D017046:Cost Savings / Q000639:trends; D006264:Health Benefit Plans, Employee / Q000191:economics*; D006801:Humans; D018854:Managed Competition / Q000191:economics*