essays in public finance and industrial organization a dissertation ...
essays in public finance and industrial organization a dissertation ...
essays in public finance and industrial organization a dissertation ...
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CHAPTER 2. HEALTH PLAN CHOICE 99<br />
the employer level.<br />
One important po<strong>in</strong>t about risk-rated premiums <strong>in</strong> health <strong>in</strong>surance is that cov-<br />
erage is typically purchased on an annual basis. While risk-rat<strong>in</strong>g might <strong>in</strong>crease<br />
static efficiency, it exposes households to reclassification risk as their health status<br />
changes over time. This is one argument for community rat<strong>in</strong>g or nondiscrimation <strong>in</strong><br />
employer contributions. It is <strong>in</strong>terest<strong>in</strong>g to ask whether there are ways to promote<br />
static efficiency that nevertheless mitigate reclassification risk. One natural approach<br />
is to ensure that consumers have a basel<strong>in</strong>e option whose price is <strong>in</strong>dependent of risk,<br />
<strong>and</strong> allow <strong>in</strong>cremental purchases to be risk-rated. An alternative would be longer-<br />
term contracts that provide dynamic <strong>in</strong>surance (e.g., ?). Underst<strong>and</strong><strong>in</strong>g the dynamic<br />
aspects of health <strong>in</strong>surance are an important challenge for future empirical work.<br />
2.7 Appendix to Chapter 2<br />
This Appendix compares our dem<strong>and</strong> estimates to the broader literature on health<br />
plan choice, <strong>and</strong> discusses alternative specifications of the consumer dem<strong>and</strong> model.<br />
2.7.1 Comparison to Dem<strong>and</strong> Estimates <strong>in</strong> Other Sett<strong>in</strong>gs<br />
As reported <strong>in</strong> Table 2.4, we f<strong>in</strong>d that on average a $100 dollar <strong>in</strong>crease <strong>in</strong> the annual<br />
enrollee contribution decreases market share by 7 to 9 percent. Studies <strong>in</strong> similar<br />
sett<strong>in</strong>gs vary <strong>in</strong> their method for report<strong>in</strong>g elasticities. Follow<strong>in</strong>g ?, we reconcile<br />
the estimates of price elasticity across studies by convert<strong>in</strong>g them to semi-elastiticies<br />
(calculated as the percent change <strong>in</strong> market share <strong>in</strong> response to a $100 <strong>in</strong>crease<br />
<strong>in</strong> the employee contribution). Because the studies cover different time periods, we<br />
adjust the change <strong>in</strong> the employee contribution for <strong>in</strong>flation. After mak<strong>in</strong>g these<br />
adjustments, most studies estimate semi- elastiticities <strong>in</strong> the range of -1.5 to -4.3 for<br />
the ma<strong>in</strong> specifications (????). Estimates from ? are somewhat higher (rang<strong>in</strong>g from<br />
-2.4 to -9.6 for the ma<strong>in</strong> specifications <strong>and</strong> even higher <strong>in</strong> some models). Similarly, ?,<br />
who analyze retirees, have an estimate that implies a semi-elastiticity of -9.0.