Information and Consumer Choice: The Value of Publicized Health Plan Ratings

Ginger Zhe Jin and Alan T. Sorensen

No 11514, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We use data on the enrollment decisions of federal annuitants to estimate the influence of publicized ratings on health plan choice. We focus on the impact of ratings disseminated by the National Committee for Quality Assurance (NCQA), and use our estimates to calculate the value of the information. Our approach exploits a novel feature of the data—the availability of nonpublic plan ratings—to correct for a source of bias that is inherent in studies of consumer responsiveness to information on product quality: since publicized ratings are correlated with other quality signals known to consumers (but unobserved by researchers), the estimated influence of ratings is likely to be overstated. We control for this bias by comparing the estimated impact of publicized ratings to the estimated impact of ratings that were never disclosed. The results indicate that NCQA's plan ratings had a meaningful influence on individuals' choices, particularly for individuals choosing a plan for the first time. Although we estimate that a very small fraction of individual decisions were materially affected by the information, for those that were affected the implied utility gains are substantial.

JEL-codes: I11 L15 (search for similar items in EconPapers)
Date: 2005-08
New Economics Papers: this item is included in nep-hea
Note: IO
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Citations: View citations in EconPapers (9)

Published as Jin, Ginger Zhe and Alan T. Sorensen. "Information And Consumer Choice: The Value Of Publicized Health Plan Ratings," Journal of Health Economics, 2006, v25(2,Mar), 248-275.

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