Plan choice, health insurance cost and premium sharing.
We develop a model of premium sharing for firms that offer multiple insurance plans. We assume that firms offer one low quality plan and one high quality plan. Under the assumption of wage rigidities we found that the employee's contribution to each plan is an increasing function of that plan's premium. The effect of the other plan's premium is ambiguous. We test our hypothesis using data from the Employer Health Benefit Survey. Restricting the analysis to firms that offer both HMO and PPO plans, we measure the amount of the premium passed on to employees in response to a change in both premiums. We find evidence of large and positive effects of the increase in the plan's premium on the amount of the premium passed on to employees. The effect of the alternative plan's premium is negative but statistically significant only for the PPO plans.
Department of Economics, Cleveland State University, USA. Electronic address: b.kosteas@csuohio.edu.
Vasilios D
VD
Kosteas
Department of Economics, The University of Akron, USA. Electronic address: frenna@uakron.edu.
Francesco
F
Renna
D002755:Choice Behavior; D003365:Costs and Cost Analysis; D006264:Health Benefit Plans, Employee / Q000145:classification / Q000191:economics* / Q000592:standards; D006801:Humans; D007342:Insurance Benefits / Q000191:economics* / Q000592:standards; D017059:Models, Econometric; D012456:Salaries and Fringe Benefits / Q000191:economics*
Employer sponsored health insurance; Multiple plans; Plan quality; Premium growth; Premium sharing