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The response to dynamic incentives in insurance contracts with a deductible: Evidence from a differences-in-regression-discontinuities design

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  • Klein, Tobias J.
  • Salm, Martin
  • Upadhyay, Suraj

Abstract

We develop a new approach to quantify how patients respond to dynamic incentives in health insurance contracts with a deductible. Our approach exploits two sources of variation in a differences-in-regression-discontinuities design: deductible contracts reset at the beginning of the year, and cost-sharing limits change over the years. Using rich claims-level data from a large Dutch health insurer we find that individuals are forward-looking. Changing dynamic incentives by increasing the deductible by €100 leads to a reduction in healthcare spending of around 3% on the first days of the year and 6% at the annual level. We find that the response to dynamic incentives is an important part of the overall effect of cost-sharing schemes on healthcare expenditures—much more so than what the previous literature has suggested.

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  • Klein, Tobias J. & Salm, Martin & Upadhyay, Suraj, 2022. "The response to dynamic incentives in insurance contracts with a deductible: Evidence from a differences-in-regression-discontinuities design," Journal of Public Economics, Elsevier, vol. 210(C).
    • Handle: RePEc:eee:pubeco:v:210:y:2022:i:c:s0047272722000627
    DOI: 10.1016/j.jpubeco.2022.104660
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    3. Avdic, Daniel & Decker, Simon & Karlsson, Martin & Salm, Martin, 2024. "No-claim refunds and healthcare use," Journal of Public Economics, Elsevier, vol. 230(C).

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    More about this item

    Keywords

    Patient cost-sharing; Health insurance; Dynamic incentives;
    All these keywords.

    JEL classification:

    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health

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