Employer contribution methods and health insurance premiums: does managed competition work?

We derive a two-stage model in which health plans first compete to be selected by employers and subsequently compete to be chosen by employees. We identify the key determinants of competition and show that increasing competition at one stage often comes at the expense of competition at the other stage. Many economists and policymakers have argued that in order to increase competition among health plans, employers should offer multiple plans and structure premium contributions to make employees more price sensitive. While our theoretical model shows that following this policy prescription may not actually lead to lower premiums, our empirical analysis provides some support for this recommendation. We also find that if employers instead pay the full premium, premiums increase when they offer additional plans. These results have important implications for both employers and policymakers.

Race/ethnicity and health insurance status: 1987 and 1996.

Health insurance confers important private and social benefits. Disparities in coverage among the population remain an important public policy issue. The authors focus on the health insurance status of white, black, and Hispanic Americans in both 1987 and 1996 and identify gaps in minority health care coverage relative to white Americans. They also investigate the access of workers in these groups to employment-based health insurance. Identified are factors underlying changes in the insurance status of workers during the past decade in terms of changes in population characteristics and structural shifts underlying the demand for and supply of health insurance. The authors find that while coverage has declined for workers in most racial/ethnic groups, the experience of Hispanic males appears to be unique in that changes in their characteristics as well as structural shifts account for their decline in employment-related coverage. Structural shifts dominated the changes in coverage rates for other groups.

The demand for Medicare supplemental insurance benefits: the role of attitudes toward medical care and risk.

This paper uses data from the 1987 National Medical Expenditure Survey to analyze the role that attitudes toward medical care and risk play in Medicare beneficiaries' demand for supplemental insurance. We investigate the factors affecting the demand for any supplemental insurance as well as specific Medigap benefits, such as coverage for Medicare's gaps in hospital and physician services, skilled nursing facility care, and prescription drug purchases. Our results indicate that attitudes significantly influence beneficiaries' decisions to purchase supplemental insurance and specific benefits with effects that are comparable in magnitude to those of self-reported health measures, education, and asset income.

Who belongs to HMOs: a comparison of fee-for-service versus HMO enrollees.

As employers have turned to managed care to curtail the rising cost of health care benefits, the number of HMO enrollees has proliferated. Between 1984 and 1994, HMO enrollment increased from approximately 15 million to over 49 million individuals. Although research has indicated that HMOs have been effective in limiting medical costs, there is mixed evidence in the literature on how they achieve these savings. This article uses data from the 1987 National Medical Expenditure Survey to examine one hypothesis for these patterns: that HMOs enroll a healthier population than fee-for-service plans. To test this hypothesis we examine HMO and fee-for-service enrollees with respect to socioeconomic variables such as age, race, sex, income, education, health status, and location. Our results indicate that HMOs tend to enroll a younger but not much healthier population than traditional fee-for-service plans, suggesting that self-selection is not a major contributor to HMO cost savings.

Implicit pooling of workers from large and small firms.

Risk pools for small employers have become an integral part of proposals for national health care reform and have been implemented by a number of states. These explicit attempts to pool small employers are occurring at the same time that many small-firm employees obtain health insurance through implicit pooling arrangements as the dependent of a policyholder insured by a large firm. We use data from the 1987 National Medical Expenditure Survey to document the extent of implicit pooling arrangements, to examine whether small-firm employees and their dependents are adverse health risks, and to assess the cost implications of pooling small- and large-firm employees and dependents.

Multiple sources of Medicare supplementary insurance.

Estimates from the National Medical Expenditure Survey imply that in 1987 only two-thirds of elderly Medicare beneficiaries held the amount and type of insurance that is generally recommended to supplement Medicare, namely, 57.7% with private hospital/medical insurance from one source and 6.6% with only Medicaid. Of the remainder, 19.8% had more than one source of private insurance; slightly more than 1% had one source of extra-cash or disease-specific insurance as their only supplementary coverage; and 12.9% had no supplementary coverage at all. In addition, more than 500,000 Medicaid enrollees had purchased private insurance, despite the comprehensive coverage offered by Medicaid. Although the issue of multiple coverage has been dramatized by stories of poor, very elderly persons who have purchased numerous Medigap plans, beneficiaries who purchase coverage from more than one source are likely to be relatively young, more highly educated, and financially better off.