Pricing and Welfare in Health Plan Choice

M. Bundorf, Jonathan Levin and Neale Mahoney
Additional contact information
M. Bundorf: Stanford University
Neale Mahoney: Department of Economics, Stanford University

No 07-047, Discussion Papers from Stanford Institute for Economic Policy Research

Abstract: Prices in government and employer-sponsored health insurance markets only partially reflect insurers' expected costs of coverage for different enrollees. This can create inefficient distortions when consumers self-select into plans. We develop a simple model to study this problem and estimate it using new data on small employers. In the markets we observe, the welfare loss compared to the feasible efficient benchmark is around 2-11% of coverage costs. Three-quarters of this is due to restrictions on risk-rating employee contributions; the rest is due to inefficient contribution choices. Despite the inefficiency, we find substantial benefits from plan choice relative to single-insurer options.

Keywords: healthcare costs; health insurance; government-sponsered health insurance; employer-sponsored health insurance (search for similar items in EconPapers)
JEL-codes: I18 (search for similar items in EconPapers)
Date: 2008-06
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Citations: View citations in EconPapers (23)

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Related works:
Journal Article: Pricing and Welfare in Health Plan Choice (2012)
Working Paper: Pricing and Welfare in Health Plan Choice (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:sip:dpaper:07-047

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