Dominated Options in Health Insurance Plans

Chenyuan Liu and Justin Sydnor

American Economic Journal: Economic Policy, 2022, vol. 14, issue 1, 277-300

Abstract: Prior research documents that there are sometimes dominated options in health plan menus, but is that common? We analyze Kaiser Family Foundation data on health plans that firms offer to their employees. For firms offering both a high-deductible and lower-deductible health plan, 62 percent of the time the high-deductible option has lower maximum spending risk for the employee. We estimate that the high-deductible plan dominates at roughly half of firms. We discuss potential mechanisms behind these surprising patterns and find support both for two explanations: widespread adverse-selection pricing and some employers also differentially favoring high-deductible plans.

JEL-codes: G22 G52 I13 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1257/pol.20190312

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