Health Insurance

Movement Across Health Plans

Why do people change health plans? Of course, the most obvious reasons are moving, changing jobs, or qualifying for Medicare. However, some people change health plans even when they remain in the same job. Why is this? A working paper by Cutler, Lincoln and Zeckhauser (2009) give the following explanations:

  • Adverse selection, the movement of the less healthy to more generous plans;
  • Adverse retention, the tendency for people to stay where they are when they get sick;
  • Aging in place, where lack of all movement makes plans with initially older enrollees increase in cost over time.

The authors use data 1994-2004 data from Massachusetts state workers and from workers enrolled in the state’s health insurance system, the Group Insurance Commission. They find that aging in place and adverse selection are both quantitatively important.

Miller-McCune also has a nice article on this research.

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