Cost-Sharing or Rebate: The Impact of Health Insurance Design on Reducing Inefficient Care

37 Pages Posted: 25 Mar 2020

See all articles by Markus Fels

Markus Fels

University of Dortmund - Department of Economics

Nadja Kairies-Schwarz

University of Duisburg-Essen; University of Duisburg-Essen

Christian Waibel

ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich

Date Written: February 28, 2020

Abstract

This paper investigates how the design of health insurance plans impacts individuals' treatment decisions. We vary the design between cost-sharing and rebates. We derive several hypotheses how the design of the health insurance plan affects behavior. In a laboratory experiment, we find that rebates are more effective in containing cost as individuals request significantly less inefficient low-value care under rebates than under cost-sharing. We link individual decisions to a direct measure of loss aversion but find no evidence that loss aversion influences utilization rates. Our results suggest that relative thinking and the difficulty to understand the dynamic incentive structure drive the design effect.

Keywords: laboratory experiment, cost-sharing, rebates, loss aversion, framing, relative thinking

JEL Classification: I13, I18, D02, D91

Suggested Citation

Fels, Markus and Kairies-Schwarz, Nadja and Waibel, Christian, Cost-Sharing or Rebate: The Impact of Health Insurance Design on Reducing Inefficient Care (February 28, 2020). Available at SSRN: https://ssrn.com/abstract=3545781 or http://dx.doi.org/10.2139/ssrn.3545781

Markus Fels (Contact Author)

University of Dortmund - Department of Economics ( email )

D-44221 Dortmund
Germany

Nadja Kairies-Schwarz

University of Duisburg-Essen ( email )

Lotharstrasse 1
Duisburg, 47048
Germany

University of Duisburg-Essen ( email )

Lotharstrasse 1
Duisburg, 47048
Germany

Christian Waibel

ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich ( email )

Zürichbergstrasse 18
Zurich, 8092
Switzerland

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