The Impact of Tort Reform on Employer-Sponsored Health Insurance Premiums
Journal of Law, Economics, and Organization, December 2010
30 Pages Posted: 2 Aug 2009 Last revised: 14 Feb 2011
Date Written: December 30, 2010
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
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