Health Insurance Menu Design for Large Employers

62 Pages Posted: 28 Sep 2020 Last revised: 23 Feb 2022

See all articles by Kate Ho

Kate Ho

National Bureau of Economic Research (NBER); Princeton University - Department of Economics

Robin S. Lee

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: September 2020

Abstract

We explore the challenges faced by a large employer designing a health insurance plan menu for its employees. Using detailed administrative data from Harvard University, we estimate a model of plan choice and utilization, and evaluate the benefits of cost sharing and plan variety. For a single plan with a generous out-of-pocket maximum, we find that modest cost sharing of approximately 30% maximizes average employee surplus. Further gains from offering choice are limited if based solely on financial dimensions, but can be economically significant if paired with other features that appeal to sicker households.

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Suggested Citation

Ho, Kate and Ho, Kate and Lee, Robin S., Health Insurance Menu Design for Large Employers (September 2020). NBER Working Paper No. w27868, Available at SSRN: https://ssrn.com/abstract=3700696

Kate Ho (Contact Author)

National Bureau of Economic Research (NBER)

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Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
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Robin S. Lee

Harvard University - Department of Economics ( email )

1805 Cambridge St.
Cambridge, MA 02138
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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