The Impact of Tort Reform on Employer-Sponsored Health Insurance Premiums

30 Pages Posted: 2 Aug 2009 Last revised: 14 Feb 2011

See all articles by Ronen Avraham

Ronen Avraham

Tel Aviv University - Buchmann Faculty of Law; University of Texas at Austin - School of Law

Leemore S. Dafny

Northwestern University - Department of Management & Strategy; National Bureau of Economic Research (NBER)

Max M. Schanzenbach

Northwestern University - Pritzker School of Law

Multiple version iconThere are 2 versions of this paper

Date Written: December 30, 2010

Abstract

We evaluate the effect of tort reform on employer-sponsored health insurance premiums by exploiting state-level variation in the timing of reforms. Using a dataset of healthplans representing over 10 million Americans annually between 1998 and 2006, we find that caps on non-economic damages, collateral source reform, and joint and several liability reform reduce premiums by 1 to 2 percent each. These reductions are concentrated in PPOs rather than HMOs, suggesting that can HMOs can reduce “defensive” healthcare costs even absent tort reform. The results are the first direct evidence that tort reform reduces healthcare costs in aggregate; prior research has focused on particular medical conditions.

Keywords: health care reform, tort reform, insruance

Suggested Citation

Avraham, Ronen and Dafny, Leemore S. and Schanzenbach, Max Matthew, The Impact of Tort Reform on Employer-Sponsored Health Insurance Premiums (December 30, 2010). Journal of Law, Economics, and Organization, December 2010, CELS 2009 4th Annual Conference on Empirical Legal Studies Paper, U of Texas Law, Law and Econ Research Paper No. 196, Available at SSRN: https://ssrn.com/abstract=1441903 or http://dx.doi.org/10.2139/ssrn.1441903

Ronen Avraham

Tel Aviv University - Buchmann Faculty of Law ( email )

Ramat Aviv
Tel Aviv, 69978
Israel

University of Texas at Austin - School of Law ( email )

727 East Dean Keeton Street
Austin, TX 78705
United States
(512) 232-1357 (Phone)

HOME PAGE: http://www.utexas.edu/law/faculty/profile.php?id=ra22397

Leemore S. Dafny (Contact Author)

Northwestern University - Department of Management & Strategy ( email )

Kellogg School of Management
2001 Sheridan Road
Evanston, IL 60208
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Max Matthew Schanzenbach

Northwestern University - Pritzker School of Law ( email )

375 E. Chicago Ave
Chicago, IL 60611
United States

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