Working Paper: NBER ID: w15164
Authors: David M. Cutler; Bryan Lincoln; Richard J. Zeckhauser
Abstract: This study assesses the factors influencing the movement of people across health plans. We distinguish three types of cost-related transitions: adverse selection, the movement of the less healthy to more generous plans; adverse retention, the tendency for people to stay where they are when they get sick; and aging in place, where lack of all movement makes plans with initially older enrollees increase in cost over time. Using data from the Group Insurance Commission in Massachusetts, we show that aging in place and adverse selection are both quantitatively important. Each can materially impact equilibrium enrollments, especially when premiums to enrollees reflect these costs.
Keywords: health plans; adverse selection; aging in place; insurance markets
JEL Codes: I01; I11; I18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Heavily Subsidized Premiums (H23) | Diminished Impact of Adverse Selection (D82) |
| Adverse Selection (D82) | Movement into More Generous Health Plans (I13) |
| Higher Expected Medical Spending (H51) | Switching to Plans with Better Coverage (G52) |
| Adverse Retention (G52) | High-Risk Individuals Remaining in Current Plans (G52) |
| Higher Past Spending (D12) | Less Likely to Switch Plans (G52) |
| Aging in Place (J26) | Increased Costs Over Time for Plans with Older Populations (J32) |