Health Insurance Menu Design for Large Employers

Kate Ho and Robin Lee

No 27868, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We provide a framework for large employers designing a menu of health plan offerings that differ on both financial and non-financial dimensions. Using detailed administrative data from Harvard University, we estimate a model of plan choice and utilization, and evaluate the benefits of cost sharing and plan variety. For this population of employed consumers, and a single plan with a generous out-of-pocket maximum and zero deductible, we find that modest cost sharing of approximately 30% maximizes average employee surplus. Further gains from offering choice are limited if based solely on financial characteristics, but can be meaningful if paired with differentiation along other dimensions where consumer preferences are correlated with efficient coverage levels.

JEL-codes: I11 I13 L2 (search for similar items in EconPapers)
Date: 2020-09
New Economics Papers: this item is included in nep-hea and nep-ias
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Citations: View citations in EconPapers (4)

Published as Kate Ho & Robin S. Lee, 2023. "Health insurance menu design for large employers," The RAND Journal of Economics, vol 54(4), pages 598-637.

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Journal Article: Health insurance menu design for large employers (2023)
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