Switching costs, price sensitivity and health plan choice.
We investigate the extent to which sensitivity to health plan premiums differs across individuals according to characteristics related to the cost of switching plans. Our results indicate substantial variation in price sensitivity related to expected health care costs: younger, healthier employees are between two and four times more sensitive to price than employees who are older and who have been recently hospitalized or diagnosed with cancer. We also find evidence of status quo bias: estimated premium elasticities are significantly higher for new hires than for incumbent employees. Simulations combining our results with actuarial data illustrate the cost implications of risk-related differences in price elasticity.
Strombom
Bruce A
BA
Analysis Group/Economics Inc, Los Angelus, CA 90017, USA.
Buchmueller
Thomas C
TC
Feldstein
Paul J
PJ
D000328:Adult; D000367:Age Factors; D002140:California; D002755:Choice Behavior; D003258:Consumer Behavior / Q000191:economics / Q000706:statistics & numerical data*; D003365:Costs and Cost Analysis; D004651:Employment / Q000145:classification; D005249:Fees and Charges; D006264:Health Benefit Plans, Employee / Q000191:economics*; D006302:Health Services Research; D006304:Health Status; D006801:Humans; D015273:Insurance Selection Bias; D016013:Likelihood Functions; D016015:Logistic Models; D008329:Managed Care Programs / Q000191:economics / Q000706:statistics & numerical data*; D008875:Middle Aged; D017059:Models, Econometric; D012307:Risk Factors; D014495:Universities