Suboptimal provision of preventive healthcare due to expected enrollee turnover among private insurers

Bradley Herring

Health Economics, 2010, vol. 19, issue 4, 438-448

Abstract: Many preventive healthcare procedures are widely recognized as cost‐effective but have relatively low utilization rates in the US. Because preventive care is a present‐period investment with a future‐period expected financial return, enrollee turnover among private insurers lowers the expected return of this investment. In this paper, I present a simple theoretical model to illustrate the suboptimal provision of preventive healthcare that results from insurers ‘free riding’ off of the provision from others. I also provide an empirical test of this hypothesis using data from the Community Tracking Study's Household Survey. I use lagged market‐level measures of employment‐induced insurer turnover to identify variation in insurers' expectations and test for the effect of turnover on several different measures of medical utilization. As expected, I find that turnover has a significantly negative effect on the utilization of preventive services and has no effect on the utilization of acute services used as a control. Copyright © 2009 John Wiley & Sons, Ltd.

Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:wly:hlthec:v:19:y:2010:i:4:p:438-448

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