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Exogenous shocks effects on health plan choice switching
Fabian Duarte Yuri Plasencia
Universidad de Chile
23 de octubre de 2013
Fabian Duarte, Yuri Plasencia (Universidad de Chile)Exogenous shocks effects on health plan choice switching
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Outline
1 Introduction
2 Health Insurance System
3 Literature Review
4 Results
5 Conclusions
Fabian Duarte, Yuri Plasencia (Universidad de Chile)Exogenous shocks effects on health plan choice switching
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Introduction
1 Many countries are trying to improve their health care systems, introducingnew reforms or changing the current policies. In order to understand howthese changes affect an individuals decision on several dimensions. How theydecide which insurance plan to purchase, and how different health shocks or
labor shocks affect their decision to switch.2 This paper analyzes switching behavior for health insurance in the Chilean
health care system. The decision to switch depends not only on thecharacteristics of individuals and plans, but also on exogenous health or laborshocks (Policy implications).
3 cost of switching from the public insurer to a private insurance plan can bevery high on multiple dimensions.
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Introduction
4 Several studies have examined switching decisions in health insurancemarkets (Bansak and Raphael, 2006; Cutler and Gruber, 1996; Kronick,2002). However, to our knowledge, none of the existing literature hasexplored how a public health insurance option affects choice in a competitivehealth insurance market, how regulations regarding pre-existing conditions
affect switching, or how labor shocks enter into the decision to switch.5 The purposes of this study are twofold. First, to give a detailed picture of the
difference and similitude between people that stay and switch systems.Second, to understand the determinants of individual health plan switchingbehavior when a public option is available, to analyze the effects of labor
shocks on switching behavior in a competitive non-employer based insurancemarket, and to measure the impact of pre-existing conditions on switchingwhen insurers can take this into consideration in their decisions about whomto insure.
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Chilean Health Insurance System
1 Health insurance in Chile is either private or public and it is mandatory for
salaried workers and retirees. They have to spend at least 7 % of their taxableincome each year on health insurance premiums (FONASA,1 andISAPRES,13)
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Chilean Health Insurance System
Cuadro :Characteristics of the private health insurance market (2008)
Market Share Expenditure Advertising
Open Isapres
Colmena 14.87 % 118.7 0.83
Normedica 2.34 % 9.27 0.09Cruz Blanca S.A. 18.20 % 114.3 1.30Vida Tres 4.91 % 47.15 0.10Ferrosalud 0.74 % 2.80Masvida S.A. 10.71 % 51.69 1.92Isapre Banmedica 21.00 % 130.0 0.32Consalud S.A. 23.15 % 99.45 0.45
Closed Isapres
San Lorenzo 0.18 % 0.83 0.002Fusat Ltda. 1.29 % 17.14Chuquicamata 1.32 % 7.39Rio Blanco 0.23 % 5.25Isapre Fundacion 0.93 % 7.86 0.004Cruz del Norte 0.14 % 1.03
September 2008.Health Expenditure. In thousand of dollars, September 2008.
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Literature Review
1 Buchmueller and Feldstein (1996) used premium as the main variableexplaining switching, they found that individuals are highly responsive tochanges in premium (UCLA).
2 Strombom (2002) showed that there is substantial variation in pricesensitivity related to expected health costs. They found that younger,healthier employees are between two and four times more sensitive to pricethan employees who are older and who have been recently hospitalized ordiagnosed with cancer.
3 Tchernis and Newhouse (2006) show that those who switch to a lessgenerous plan exhibit lower medical spending prior to the switch; those whoswitch to a more generous plan exhibit higher medical spending and delaytheir spending until after the switch.
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Literature Review
1 Altman and Zeckhauser (1998) used data on plan enrollment and utilizationfor individuals insured by the Group Insurance Commission of Massachusettsto analyze the factors that account for differences in plan premiums and totest for the presence of adverse selection or adverse retention.
2 Beaulieu (2002) analyzed plan switching behavior using a panel data ofHarvard employees from 1994-1997. She suggested that the provision ofinformation on quality had a small, but significant effect on consumer planchoices.
3 Pardo and Schott (2010) use data from the Social Protection Survey forChile to model health insurance choice as a dynamic stochastic process. Inthismodel, individuals consider premiums, expected out-of-pocket costs andpreferences.
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Data: Descriptive statistics
Cuadro :Summary statistics Panel EPS 2004-2006
Public Private Total
Age 47.6 41.1 46.8Female 47.8 % 37.4 % 46.6 %Monthly salary $230.4 $1,470.1 $374.6Total dependents 0.909 1.214 0.945Monthly premium $16.13 $86.17 $24.27Living in Santiago 32.8 % 49.8 % 34.7 %College educated 10.2 % 55.2 % 15.4 %Health Status 2004 13.4 % 26.6 % 14.9 %Health Status 2009 13.6 % 28.2 % 15.3 %Surgery 2004 3.9 % 6.2 % 4.2 %Surgery 2009 7.3 % 9.6 % 7.6 %Freq. doctor visits 2004 1.074 1.007 1.067Freq. doctor visits 2009 2.090 1.971 2.076Freq. test 2004 0.455 0.626 0.475
Freq. tests 2009 1.176 1.385 1.200
Proportion of people who answered verygood or excellent in each year. The other alternativeswere good, regular, bad and very bad.
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Data: Staying and Switching in the Public System
Cuadro :Summary Statistics Switch vs Stay
Stay Group Switch group(Mean) (Mean)
Age 47.48 36.12Total dependents 0.916 1.059Education 0.107 0.526
Monthly salary $237.2 $1,591.6Monthly premium $16.88 $67.78Freq. doctor visits 2004 1.066 0.873Freq. test 2004 0.455 0.489Freq surgeries 2004 0.054 0.043Freq. hospital visits 2004 0.100 0.038Freq. doctor visits 2009 2.077 1.739Freq. test 2009 1.170 1.257Freq. surgeries 2009 0.111 0.105Freq. hospital visits 2009 0.195 0.162Illness 0.310 0.126
Health Status 2004 0.615 0.865
Dummy of more than high school education.Dummy variable.
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Data: Staying and Switching in the Private System
Cuadro :Summary Statistics Private Policyholders
Stay Group Switch Group(Mean) (Mean)
Age 42.65 39.20Total dependents 1.226 1.198Education 0.602 0.490
Monthly salary $1,554.2 $1,365.9Monthly premium $99.02 $70.27Freq. doctor visits 2004 1.026 0.982Freq. test 2004 0.716 0.514Freq surgeries 2004 0.086 0.052Freq. hospital visits 2004 0.077 0.074Freq. doctor visits 2009 2.288 1.578Freq. test 2009 1.532 1.202Freq. surgeries 2009 0.144 0.097Freq. hospital visits 2009 0.168 0.150Illness 0.213 0.167
Health Status 2004 0.850 0.861
Dummy of more than high school education.Dummy variable.
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Empirical analysis of switching
1 Buchmueller and Feldstein (1996) used premium as the main variableexplaining switching while Tchernis and Newhouse (2006) used measures ofmedical usage to explain switching.
2 However, recently Pardo and Schott (2013) analyze the determinants ofhealth insurance selection between private an public system by individuals inChile, controlling by a set of individual observed and unobservedcharacteristics.
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Results: Switching from Public to Private Plans
Cuadro :Survival function estimation
Switching from Public to private
VARIABLES sw pub pri
salary -3.43e-10
(1.17e-09)get a job -0.200***
(0.0236)lose a job -0.0190
(0.0233)lag2 getajob -0.199***
(0.0248)dumm illness -0.115***
(0.00378)freq doctor visits2004 0.00132***
(0.000341)Observations 332,316
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R l S i hi f d B P i Pl
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Results: Switching from, and Between, Private Plans
Cuadro :Survival function estimation
Switching from Private
VARIABLES Public Private
salary 6.84e-10 1.40e-07***(7.97e-10) (1.95e-08)
lose a job -0.178*(0.1000)
lag1 loseajob -0.301***(0.101)
dumm uni on 0.0451***(0.0143)
dum working -0.0688*** -0.0468**(0.0207) (0.0198)
dumm i ll ness -0.0972*** -0.0923***(0.0166) (0.0165)
lag1 dum monthpay -0.0196 -0.0459*(0.0262) (0.0262)
lag2 dum monthpay -0.0369 -0.0486*(0.0266) (0.0267)
tenureplan -7.79e-05 0.000125(0.000108) (0.000110)
age -0.00327*** -0.00274***
(0.000575) (0.000576)savings amt 6.92e-11 -5.26e-11
(2.45e-10) (2.47e-10)school ab ove secondary lvl 0.00583 -0.000361
(0.0123) (0.0122)delta health -0.00854 -0.0115
(0.00872) (0.00874)freq doctor visits2004 0.000254 0.000862
(0.00153) (0.00154)total premium -2.00e-06***
(2.79e-07)Observations 28,560 28,560
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1 Conclusions and looking ahead
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C l i
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Conclusions
Switching behavior is driven by multiple factors that vary depending on theindividual and the plans offered.
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C l i
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Conclusions
Switching behavior is driven by multiple factors that vary depending on theindividual and the plans offered.
In Chile, the relative importance of the variables is influenced by the structure of
the insurance market and by regulations.
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Conclusions
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Conclusions
Switching behavior is driven by multiple factors that vary depending on theindividual and the plans offered.
In Chile, the relative importance of the variables is influenced by the structure of
the insurance market and by regulations.
The public option works as a safety net for individuals losing their jobs.
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Conclusions
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Conclusions
Switching behavior is driven by multiple factors that vary depending on theindividual and the plans offered.
In Chile, the relative importance of the variables is influenced by the structure of
the insurance market and by regulations.
The public option works as a safety net for individuals losing their jobs.
Regulations on pre-existing conditions affect the utility of individuals.
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Conclusions
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Conclusions
Switching behavior is driven by multiple factors that vary depending on theindividual and the plans offered.
In Chile, the relative importance of the variables is influenced by the structure of
the insurance market and by regulations.
The public option works as a safety net for individuals losing their jobs.
Regulations on pre-existing conditions affect the utility of individuals.
It is not clear that allowing individuals to switch could increase or decrease costs.
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Looking ahead
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Looking ahead
Study with more detail switching behavior
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Looking ahead
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Looking ahead
Study with more detail switching behavior
It is better to work with administrative records and link those records with labor
history and health care history. Self-report issues!
It is necessary to study consumer behavior in the private health insurance marketto understand to which plans individuals switched.
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