the importance of group coverage how tax policy shaped u s health insurance in 1954 the internal revenue service stipulated that employer contributions to the health insurance plans of their employees were to be excluded from employee taxable income today the tax subsidy is major feature of the u s health care market this paper examines the initial effects of the tax subsidy on the demand for health insurance using previously unexamined data from 1953 and 1958 results suggest that the tax subsidy increased the growth of group insurance particularly among union members and employed persons this is a critical effect because group insurance is not only less expensive than individual insurance but it is also easier to obtain and households with access to group health insurance are far more likely to purchase health insurance coverage than those without similar access by increasing access to group insurance the tax subsidy fostered an increase in the purchase of group health insurance by people who may not have purchased individual coverage and generated institutional change as it cemented an employment based system of group health insurance in the united states this abstract was borrowed from another version of this item

the effect of report cards on consumer choice in the health insurance market we test the effect of report cards on consumer choice in the hmo market federal employees were provided with report cards on a limited basis in 1995 and then on a widespread basis in 1996 exploiting this natural experiment we find that subjective measures of quality and coverage influence plan choices after controlling for plan premiums expected out of pocket expenses and service coverages the effect is stronger within a small sample of new hires compared to a larger sample of existing federal employees we also find evidence that report cards increase the price elasticity of demand for health insurance

the role of income and health risk in the choice of health insurance evidence from australia abstract health insurance choice is investigated using individual data from australia where all people faced a common limited set of possible health insurance policies the data cover two separate regimes one in which insurance choice was for a more generous level of coverage and one in which the choice was a more dramatic one between insurance and no insurance coverage in determining health insurance choice the results indicate a major role for income a major role for premium notably in the first regime and a minor role for observed factors related to health risk aside from age and sex

price elasticity and adverse selection in the demand for supplementary health insurance probit regression estimates show the effects of the price of insurance anticipated medical expenditures and other factors on reported decisions about purchasing hypothetically offered supplementary insurance policies the demand estimates can characterize how much supplemental insurance would be purchased under different tax policies affecting health insurance purchases although eliminating the current tax subsidy to insurance is shown to decrease demand the results indicate a substantial demand for supplementary insurance even in the absence of present tax incentives however our results on adverse selection raise concerns about the potential stability of supplemental insurance markets

models of health plan choice this paper considers alternative approaches to accounting for consumer heterogeneity in econometric models of health plan choice in particular we compare and contrast approaches used by health economists and marketing researchers to explicitly allow for consumer heterogeneity in assessment of plan provider quality and characteristics as a result we are able to identify conditions under which approaches utilized by health economists are preferred over those utilized by marketing researchers and vice versa for example we find that in the absence of data on prior year choice which is often the case of models estimated in the health economics literature it would be valuable to estimate random coefficient models which have not been estimated in such works and in the presence of data on prior year choice which is often the case of models estimated in the marketing literature a model wherein consumer characteristics simply interact with plan specific constants and premium and which has not been estimated in that literature offers better fits than random coefficient semi parametric random coefficient and latent class models which have been previously estimated in that literature the model offers important managerial insights useful for targeting benefits of various plans to different customer segments

full scale real tests of consumer behavior using experimental data abstract this paper reports on the results of three experiments based on the neoclassical theory of consumer behavior all these experiments were carried out with the aim of simulating real world behavior nonparametric tests applying the theory of revealed preference show that a significant number of individuals exhibit inconsistent behavior if nearly optimizing behavior is postulated then most of these inconsistencies disappear but random choices produce almost the same results the hypothesis of a representative consumer statistical average behavior seems a more fruitful approach

demand for medigap insurance by the elderly a micro simulation analysis in this paper a micro simulation model is developed to explain and estimate the optimum medigap insurance coverage for elderly with different levels of insurance premium subsidy the medigap risk exposure is estimated from the 1977 national medical care expenditure utilization survey utilizing the gamma distribution the theory of expected utility maximization is assumed and the model for health insurance demand is operationalized for hypothetical parameters for risk aversion the price elasticity of demand the loading fee and the subsidy with the risk aversion parameter at 0 0005 the price elasticity of medical care demand at 0 5 loading costs at 9 without any subsidy the optimal medigap coinsurance rate is 0 78 and with a premium subsidy of 60 the co insurance rate falls to 12 the hypothetical price elasticity of demand for medigap insurance is estimated to be between 0 44 and 1 02 more than half of the increase in medical expenditure resulting from an increase in premium subsidy from

the arbitrage principle in financial economics abstract the importance of arbitrage conditions in financial economics has been recognized since modigliani and miller s classic work on the financial structure of the firm they showed that if a f

do rational demand functions differ from irrational ones evidence from an induced budget experiment various studies e g becker 1962 ariely et al 2003 have noted anomalies concerning the relationship between observed demand and the preferences presumed to motivate it we re examine these findings using experimental choice data after separating our subjects choices into rational and irrational subsets based on consistency with the axioms of revealed preference we estimate and compare demand coefficients mirroring ariely et al s coherently arbitrary choice both rational and irrational demand estimates exhibit negative price and positive endowment coefficients however a comparison of the full set of demand coefficients indicates significant differences between the two yielding an observable artefact of the preference hypothesis relaxing the goodness of fit of the revealed preference test afriat 1987 varian 1994 does not alter our findings

tax policy toward health insurance and the demand for medical services abstract researchers have argued that the tax subsidy to employer provided health insurance has led to overinsurance excess demand for medical care and to rapid expenditure growth in the medical care sector this paper determines the quantitative significance of this linkage using existing estimates of the elasticities of demand for health insurance and medical services in a static microsimulation model we find that incorrect assumptions about the elasticities of demand and pattern of health insurance coverage led earlier researchers to overestimate the likely impact of the elimination of the tax expenditures for health insurance we estimate using mid range assumptions that complete elimination of the favorable tax treatment of employer contributions to health insurance would reduce the demand for employer sponsored health insurance by 16 27 percent and the overall demand for medical services by about 4 6 percent and not more than 10 percent

how basic are behavioral biases evidence from capuchin monkey trading behavior behavioral economics has demonstrated systematic decision making biases in both lab and field data do these biases extend across contexts cultures or even species we investigate this question by introducing fiat currency and trade to a colony of capuchin monkeys and recovering their preferences over a range of goods and gambles we show that capuchins react rationally to both price and wealth shocks but display several hallmark biases when faced with gambles including reference dependence and loss aversion given our capuchins inexperience with money and trade these results suggest that loss aversion extends beyond humans and may be innate rather than learned

alternative models of choice under uncertainty and demand for health insurance the authors test a standard expected utility model and alternative models about how people evaluate risky prospects using data about individuals preferences among health insurance plans a model that assumes people evaluate gains and losses relative to a reference rather than final outcomes treat gains and losses asymmetrically and process certain and uncertain outcomes separately provides a better fit than the standard utility model these findings suggest inertia in health insurance plan choice and that individuals are more responsive to decreases than to increases in the price of insurance copyright 1996 by mit press

firm leadership and innovative performance evidence from seven eu countries this paper considers the effect of different firm leadership on the innovative performance of firms from seven eu countries we investigate whether owner led or manager led firms achieve a larger share of their turnover with product innovations economic theory does not propose clear answers to this question in the empirical analysis it turns out that the manager led firms are more active innovators the share of sales based on new products is larger if firms managers do not hold any of the firms capital surprisingly there are no differences between the seven countries included in the regression analysis

nonparametric comparative revealed risk aversion abstract we introduce a nonparametric method to compare risk aversion of different investors based on revealed preference methods using yaari s 1969 50 definition of more risk averse than we show that it is sufficient to compare the revealed preference relations of two investors this makes the approach operational the central rationalisability theorem provides strong support for this approach we also provide a measure of economic significance to quantify the differences in risk aversion which can also help to interpret differences in risk aversion in parametric models the approach is an alternative or complement to parametric approaches and a robustness check as a necessary first step towards this comparative approach we show how to test data for consistency with stochastic dominance relations which can also be used to recover larger parts of preferences we include an application to experimental data by choi et al 2007 10 11 which demonstrates the potential of the comparative approach

how elastic is the firm s demand for health insurance abstract we investigate the impact of tax subsidies on the firm s decision to offer insurance and on conditional firm spending on insurance we do so using the micro data underlying the employment cost index which has a major advantage for this exercise the matching of very high quality compensation data with information on a sample of workers in the firm we find that overall there is a moderately sized elasticity of insurance offering with respect to after tax prices 0 25 and a larger elasticity of insurance spending 0 7 we also find that the elasticities are driven primarily by small firms for whom the elasticity is larger and we find that there is significant value added to this employer based data replicating methods from standard micro data sources in our data lead to misleading estimates of these key parameters our simulation results suggest that major tax reform could lead to an enormous reduction in employer provided health insurance spending

constrained choice sets in the u k demand for private medical insurance abstract the paper examines the demand for a privately supplied good private medical insurance in a market dominated by a large public supplier it is argued that the high political visibility of the public alternative means that individual demand for private medical insurance is the outcome of two processes the first process is one of choice set generation the second process is that of the choice between the insurance and the no insurance prospects the factors affecting these processes are discussed and an econometric specification suggested the estimation results indicate the importance of political belief in determining choice sets and of income and health in determining choice between the two prospects

tax policy and the demand for health insurance estimates of the price and income elasticities of demand for health insurance are derived from econometric estimates of the parameters of a discrete choice model of health insurance demand using data from a survey of plan choices among a sample of federal government employees the estimated income elasticity 0 01 is similar to most previous estimates the estimated price elasticity 0 16 is in absolute value much less than the earlier previous estimates and somewhat less than the more recent previous estimates possible causes of these differences in price elasticity estimates are discussed

paying for health insurance the trade off between competition and adverse selection we use data on health plan choices by employees of harvard university to compare the benefits of insurance competition with the costs of adverse selection moving to a voucher type system induced significant adverse selection with a welfare loss of 2 to 4 percent of baseline spending but increased competition reduced harvard s premiums by 5 to 8 percent the premium reductions came from insurer profits so while harvard was better off the net effect for society was only the adverse selection loss adverse selection can be minimized by adjusting voucher amounts for individual risk we discuss how such a system would work governments are increasingly turning to market forces as a way to limit the cost of social insurance traditionally social insurance programs were operated as nonmarket goods governments mandated participation in a central program collected revenues to finance the program and ran the insurance system there was no role for competition among suppliers in providing the basic benefit as the costs of social insurance have increased however the centralized model of social insurance is coming under increasing strain in the united states for example recent proposals have called for replacing the medicare program with a health care voucher for the elderly aaron and reischauer 1995 cutler 1996 the voucher would guarantee people a basic insurance plan but the plans would be privately run competition among plans would generate plan premiums and enrollments similarly longstanding proposals for social security reform have called for replacing the current system with a system of individual accounts where people would make saving investment and annuitization decisions on their own advisory council on social security 1996 feldstein 1996 the trend is not just domestic in the united kingdom the national health service has moved to encourage more competition in recent years with the establishment of hospital trusts that bid for patients and partially fixed payments to physicians

health insurance the tradeoff between risk pooling and moral hazard choosing optimal health insurance coverage involves a trade off between the gain from risk reduction and the deadweight loss from moral hazard this paper examines this trade off empirically by estimating both the demand for health insurance and the demand for health services it relies on data from a randomized controlled trial of cost sharing s effects on the use of health services and on the health status for a general non elderly population

the elasticity of demand for health maintenance organizations this paper analyzes a national sample of firms where employees faced a choice between a health maintenance organization hmo and a conventional insurer such as blue cross a regression analysis is specified as a partial adjustment model and a logit functional form the long run price elasticity of demand for hmos is estimated to be 0 6 to the extent that employers pass on increases in the total premium the price elasticities facing insurers are higher furthermore the demand for hmos is a negative function of the copayment charged by the hmo for an office visit

substitution between wage and nonwage benefits you gotta be kidding ollie you re just robbing yourself schuylkill mutual offers a terrific deal on keogh and we could plug you in in fact we advise plugging you in on the corporate end so not a nickel comes out of your personal pocket it comes out of the corporate pocket and there s that much less for uncle to tax these poor saps carrying their own premiums with no company input are living in the dark ages there s nothing shady about rigging it this way we re just using the laws the government has put there they want people to take advantage it all works to up the gross national product you know what i mean by keogh don t you you re looking kind of blank john updike p 296