The Response to Dynamic Incentives in Insurance Contracts with a Deductible: Evidence from a Differences-in-Regression-Disconti

Tobias Klein, Martin Salm and Suraj Upadhyay

No 14552, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We develop a new approach to quantify how patients respond to dynamic incentives in health insurance contracts with a deductible. Our approach exploits two sources of variation in a differences-in-regression-discontinuities design: deductible contracts reset at the beginning of the year, and cost-sharing limits change over the years. Using rich claims-level data from a large Dutch health insurer we find that individuals are forward-looking. Changing dynamic incentives by increasing the deductible by 100 euros leads to a reduction in healthcare spending of around 3% on the first days of the year and 6% at the annual level. We find that the response to dynamic incentives is an important part of the overall effect of cost-sharing schemes on healthcare expenditures—much more so than what the previous literature has suggested.

Keywords: Patient cost-sharing; Health insurance; Dynamic incentives (search for similar items in EconPapers)
JEL-codes: H51 I13 (search for similar items in EconPapers)
Date: 2020-04
New Economics Papers: this item is included in nep-hea and nep-ias
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