Controlling Health Care Costs Through Limited Network Insurance Plans: Evidence from Massachusetts State Employees

47 Pages Posted: 8 Sep 2014

See all articles by Jonathan Gruber

Jonathan Gruber

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER)

Robin McKnight

Wellesley College; National Bureau of Economic Research (NBER)

Date Written: September 2014

Abstract

Recent years have seen enormous growth in limited network plans that restrict patient choice of provider, particularly through state exchanges under the ACA. Opposition to such plans is based on concerns that restrictions on provider choice will harm patient care. We explore this issue in the context of the Massachusetts GIC, the insurance plan for state employees, which recently introduced a major financial incentive to choose limited network plans for one group of enrollees and not another. We use a quasi-experimental analysis based on the universe of claims data over a three-year period for GIC enrollees. We find that enrollees are very price sensitive in their decision to enroll in limited network plans, with the state's three month "premium holiday" for limited network plans leading 10% of eligible employees to switch to such plans. We find that those who switched spent considerably less on medical care; spending fell by almost 40% for the marginal complier. This reflects both reductions in quantity of services used and prices paid per service. But spending on primary care actually rose for switchers; the reduction in spending came entirely from spending on specialists and on hospital care, including emergency rooms. We find that distance traveled falls for primary care and rises for tertiary care, although there is no evidence of a decrease in the quality of hospitals used by patients. The basic results hold even for the sickest patients, suggesting that limited network plans are saving money by directing care towards primary care and away from downstream spending. We find such savings only for those whose primary care physicians are included in limited network plans, however, suggesting that networks that are particularly restrictive on primary care access may fare less well than those that impose only stronger downstream restrictions.

Suggested Citation

Gruber, Jonathan and McKnight, Robin, Controlling Health Care Costs Through Limited Network Insurance Plans: Evidence from Massachusetts State Employees (September 2014). NBER Working Paper No. w20462, Available at SSRN: https://ssrn.com/abstract=2492972

Jonathan Gruber (Contact Author)

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

50 Memorial Drive
Room E52-355
Cambridge, MA 02142
United States
617-253-8892 (Phone)
617-253-1330 (Fax)

HOME PAGE: http://web.mit.edu/gruberj/www/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Robin McKnight

Wellesley College ( email )

106 Central Street
Wellesley, MA 02181
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
133
Abstract Views
1,092
rank
255,028
PlumX Metrics