A Panel Analysis of the Effects of a Consumer Directed Health Insurance Plan

Abstract

We investigate the introduction of a Consumer Directed Health Plan (CDHP) in 2005 at a large, self-insured employer. Our relatively long panel enables us to observe utilization and spending for two years prior and four years after the introduction of the CDHP, enabling us to control for unobserved factors that affect both enrollment and utilization. We can also look for evidence of "pent up" demand or "stocking up" which might bias estimates of the effect of CDHPs in shorter panels. The length of our panel also allows us to determine whether the effects of CDHP enrollment persist over time. The CDHP we study has greater potential to shift spending than those studied in the prior literature because it is associated with an employee-funded health savings account (rather than a pre-Medicare Modernization Act employer-funded reimbursement account). However, we find that CDHP enrollment has little effect on utilization or spending.

Keywords: Health insurance, Consumer Directed Health Plans, Health Care Expenditure, Health Care Utilization

JEL Classification: I11, I18