American Economic Journal:
Economic Policy
ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)
Dominated Options in Health Insurance Plans
American Economic Journal: Economic Policy
(pp. 277–300)
Abstract
Prior research documents that there are sometimes dominated options in health plan menus, but is that common? We analyze Kaiser Family Foundation data on health plans that firms offer to their employees. For firms offering both a high-deductible and lower-deductible health plan, 62 percent of the time the high-deductible option has lower maximum spending risk for the employee. We estimate that the high-deductible plan dominates at roughly half of firms. We discuss potential mechanisms behind these surprising patterns and find support both for two explanations: widespread adverse-selection pricing and some employers also differentially favoring high-deductible plans.Citation
Liu, Chenyuan, and Justin Sydnor. 2022. "Dominated Options in Health Insurance Plans." American Economic Journal: Economic Policy 14 (1): 277–300. DOI: 10.1257/pol.20190312Additional Materials
JEL Classification
- G22 Insurance; Insurance Companies; Actuarial Studies
- G52 Household Finance: Insurance
- I13 Health Insurance, Public and Private