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Subsidization and Choice in the Group Health Insurance Market

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  • Yu‐Luen Ma
  • Mark Browne

Abstract

This study investigates the effect of group health insurance plan choice on insurance unit price. The empirical findings suggest that the unit price of insurance, as measured by the ratio of the premium to expected indemnity benefits, is lower in group plans that offer employees a choice of different insurance options and require a premium contribution than it is in plans lacking at least one of these two features. The analyses suggest that lower unit prices are related to an increase in indemnity benefits and that the reduction in the unit price is greater for lower risks. The findings indicate that although subsidization of high risks by low risks occurs with group health insurance, the degree of subsidization is less when employees are offered a choice of health insurance plans.

Suggested Citation

  • Yu‐Luen Ma & Mark Browne, 2005. "Subsidization and Choice in the Group Health Insurance Market," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 72(3), pages 413-439, September.
    • Handle: RePEc:bla:jrinsu:v:72:y:2005:i:3:p:413-439
    DOI: 10.1111/j.1539-6975.2005.00131.x
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    References listed on IDEAS

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    1. David M. Cutler, 2003. "Employee Costs and the Decline in Health Insurance Coverage," NBER Chapters, in: Frontiers in Health Policy Research, Volume 6, pages 27-54, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Rahkovsky, Ilya, 2010. "Exclusive contracts in health insurance," MPRA Paper 27473, University Library of Munich, Germany.
    2. Ilya Rahkovsky, 2015. "Exclusive Contracts in Health Insurance," Business and Management Research, Business and Management Research, Sciedu Press, vol. 4(2), pages 37-53, June.
    3. M. Kate Bundorf, 2010. "The Effects of Offering Health Plan Choice Within Employment‐Based Purchasing Groups," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 77(1), pages 105-127, March.

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