Selection and Plan Switching Behavior

32 Pages Posted: 22 Feb 2005

See all articles by Rusty Tchernis

Rusty Tchernis

Georgia State University - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Sharon-Lise T. Normand

Harvard Medical School & Harvard School of Public

Juliana Pakes

Harvard University - Department of Medicine

Peter Gaccione

Harvard University - Department of Medicine

Joseph P. Newhouse

Harvard Medical School; Harvard Kennedy School (HKS); National Bureau of Economic Research (NBER); Harvard University - Harvard Kennedy School (HKS)

Date Written: June 9, 2005

Abstract

A majority of employees can choose among health insurance plans of varying generosity. They may switch plans if prices, information, or their health status change. We analyze switching behavior presumptively caused by changes in health status. We show that switchers to a less generous plan have lower medical spending prior to the switch than the average for the generous plan in which they started, while switchers to a more generous plan appear to anticipate higher spending that they delay until after the switch. This transfer of costs from a less to a more generous plan increases the burden of adverse selection. Our data suggest that switching may be more important to the level of premiums than previously documented.

Keywords: Adverse Selection, Managed Care

JEL Classification: I11

Suggested Citation

Tchernis, Rusty and Normand, Sharon-Lise T. and Pakes, Juliana and Gaccione, Peter and Newhouse, Joseph P., Selection and Plan Switching Behavior (June 9, 2005). Available at SSRN: https://ssrn.com/abstract=670306 or http://dx.doi.org/10.2139/ssrn.670306

Rusty Tchernis (Contact Author)

Georgia State University - Department of Economics ( email )

P.O. Box 3992
Atlanta, GA 30302-3992
United States

HOME PAGE: http://www2.gsu.edu/~ecort

National Bureau of Economic Research (NBER)

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IZA Institute of Labor Economics ( email )

P.O. Box 7240
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Sharon-Lise T. Normand

Harvard Medical School & Harvard School of Public ( email )

Dept. of Biostatistics
Boston, MA 02115
United States
617-432-3260 (Phone)

Juliana Pakes

Harvard University - Department of Medicine ( email )

181 Longwood Avenue
Boston, MA 02115
United States

Peter Gaccione

Harvard University - Department of Medicine ( email )

181 Longwood Avenue
Boston, MA 02115
United States

Joseph P. Newhouse

Harvard Medical School; Harvard Kennedy School (HKS) ( email )

Department of Health Care Policy
Boston, MA 02115
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States

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