Jump to ContentJump to Main Navigation
Show Summary Details
More options …

The B.E. Journal of Economic Analysis & Policy

Editor-in-Chief: Ludwig, Sandra / Schmitz, Hendrik

Ed. by Barigozzi, Francesca / Brunner, Johann / Fleck, Robert / Jürges, Hendrik / Mastrobuoni, Giovanni / Mendola, Mariapia / Requate, Till / de Vries, Frans / Wenzel, Tobias

IMPACT FACTOR 2018: 0.520
5-year IMPACT FACTOR: 0.556

CiteScore 2018: 0.54

SCImago Journal Rank (SJR) 2018: 0.356
Source Normalized Impact per Paper (SNIP) 2018: 0.394

See all formats and pricing
More options …
Ahead of print


Volume 20 (2020)

Volume 6 (2006)

Volume 4 (2004)

Volume 2 (2002)

Volume 1 (2001)

Employee Choice and the Demand for Health Insurance Coverage: Evidence from Random Coefficients Models

Nour KattihORCID iD: https://orcid.org/0000-0001-7601-6752 / Franklin G. Mixon Jr.
  • Corresponding author
  • Center for Economic Education, Columbus State University, 4225 University Avenue, Columbus, GA 31907-5679, USA
  • Email
  • Other articles by this author:
  • De Gruyter OnlineGoogle Scholar
Published Online: 2020-01-18 | DOI: https://doi.org/10.1515/bejeap-2019-0153


This study examines the effects of deductibles, employee premium contributions, and the availability of tax-sheltered health savings accounts on employee selection into health insurance plans after passage of the Affordable Care Act, and particularly after implementation of the individual mandate. In doing so, a utility-based structural demand model is applied to market-level macro data from the Kaiser Family Foundation and the Health Research Educational Trust. Results from random coefficients models indicate that for an average consumer, price sensitivity for employer-sponsored health insurance plans varies by age, wage, health condition and gender. Employees who are older, obese, or female are less sensitive to deductibles and premiums than younger and healthier employees, or male employees. These findings suggest that high deductible health plans that combine a tax-sheltered account with higher deductibles will negatively impact the utility of older employees and females as compared to younger employees and males.

Keywords: health insurance; employee benefits; demand for health insurance; random coefficients model

JEL Classification: I18; I13; G22; J32; J33; J38


The authors thank two anonymous referees for many helpful comments on prior versions. The usual caveat applies.


  • Baicker, K., S. Mullainathan, and J. Schwartzstein. 2015. “Behavioral Hazard in Health Insurance.” Quarterly Journal of Economics 130: 1623–67.Web of ScienceCrossrefGoogle Scholar

  • Basmann, R. 1960. “On Finite Sample Distributions of Generalized Classical Linear Identifiability Test Statistics.” Journal of the American Statistical Association 55: 650–59.CrossrefGoogle Scholar

  • Berry, S., J. Levinsohn, and A. Pakes. 1995. “Automobile Prices in Market Equilibrium.” Econometrica 63: 841–90.CrossrefGoogle Scholar

  • Berry, S. T. 1994. “Estimating Discrete-Choice Models of Product Differentiation.” The Rand Journal of Economics 25: 242–62.CrossrefGoogle Scholar

  • Bhargava, S., G. Loewenstein, and J. Sydnor. 2017. “Choose to Lose: Health Plan Choices from a Menu with Dominated Option.” Quarterly Journal of Economics 132: 1319–72.CrossrefGoogle Scholar

  • Brot-Goldberg, Z., A. Chandra, B. Handel, and J. Kolstad. 2017. “What Does a Deductible Do? the Impact of Cost-Sharing on Health Care Prices, Quantities, and Spending Dynamics.” Quarterly Journal of Economics 132: 1261–318.Web of ScienceCrossrefGoogle Scholar

  • Bundorf, M. K., J. Levin, and N. Mahoney. 2012. “Pricing and Welfare in Health Plan Choice.” American Economic Review 102: 3214–48.Web of ScienceCrossrefGoogle Scholar

  • Claxton, G., M. Rae, M. Long, A. Damico, H. Whitmore, and G. Foster. 2017. “Health Benefits in 2017: Stable Coverage, Workers Faced Considerable Variation in Costs.” Health Affairs 36: 1838–47.Web of ScienceCrossrefGoogle Scholar

  • Cutler, D. M., and S. J. Reber. 1998. “Paying for Health Insurance: the Trade-Off between Competition and Adverse Selection.” Quarterly Journal of Economics 113: 433–66.CrossrefGoogle Scholar

  • Dafny, L., M. Duggan, and S. Ramanarayanan. 2012. “Paying a Premium on Your Premium? Consolidation in the US Health Insurance Industry.” American Economic Review 102: 1161–85.CrossrefWeb of ScienceGoogle Scholar

  • Durbin, J. 1954. “Errors in Variables.” Review of the International Statistic Institute 22: 23–32.CrossrefGoogle Scholar

  • Einav, L., A. Finkelstein, and M. R. Cullen. 2010. “Estimating Welfare in Insurance Markets Using Variation in Prices.” Quarterly Journal of Economics 125: 877–921.Web of ScienceCrossrefGoogle Scholar

  • Ericson, K., M. Marzilli, and A. Starc. 2015. “Pricing Regulation and Imperfect Competition on the Massachusetts Health Insurance Exchange.” Review of Economics and Statistics 97: 667–82.Web of ScienceCrossrefGoogle Scholar

  • Ericson, K. M., P. Kircher, J. Spinnewijn, and A. Starc. 2015. “Inferring Risk Perceptions and Preferences Using Choice from Insurance Menus: Theory and Evidence,” Unpublished Manuscript.Google Scholar

  • Finkelstein, A., S. Taubman, B. Wright, M. Bernstein, J. Gruber, J. Newhouse, H. Allen, and K. Baicker. 2012. “The Oregon Health Insurance Experiment: Evidence from the First Year.” Quarterly Journal of Economics 127: 1057–106.Web of ScienceCrossrefGoogle Scholar

  • Gandhi, A., Z. Lu, and X. Shi. 2013. “Estimating Demand for Differentiated Products with Error in Market Shares.” Unpublished Manuscript.Google Scholar

  • Gandhi, A., Z. Lu, and X. Shi. 2014. “Demand Estimation with Scanner Data: Revisiting the Loss-Leader Hypothesis.” Unpublished Manuscript.Google Scholar

  • Gilleskie, D. B. 1998. “A Dynamic Stochastic Model of Medical Care Use and Work Absence.” Econometrica 66: 1–45.CrossrefGoogle Scholar

  • Glazer, J., and T. G. McGuire. 2012. “A Welfare Measure of ‘offset Effects’ in Health Insurance.” Journal of Public Economics 96: 520–23.Web of ScienceCrossrefGoogle Scholar

  • Handel, B. R. 2013. “Adverse Selection and Inertia in Health Insurance Markets: When Nudging Hurts.” American Economic Review 103: 2643–82.CrossrefWeb of ScienceGoogle Scholar

  • Hausman, J. 1978. “Specification Tests in Econometrics.” Econometrica 46: 1251–71.CrossrefGoogle Scholar

  • Hausman, J. 1999. “Cellular Telephone, New Products, and the CPI.” Journal of Business and Economic Statistics 17: 188–94.Google Scholar

  • Haviland, A. M., M. D. Eisenberg, A. Mehrotra, P. J. Huckfeldt, and N. Sood. 2016. “Do ‘consumer-directed’ Health Plans Bend the Cost Curve over Time?” Journal of Health Economics 46: 33–51.CrossrefWeb of ScienceGoogle Scholar

  • Knittel, C. R., and K. Metaxoglou. 2014. “Estimation of Random-Coefficient Demand Models: Two Empiricists’ Perspective.” Review of Economics and Statistics 96: 34–59.Web of ScienceCrossrefGoogle Scholar

  • Liu, C., and J. Sydnor. 2018. “Dominated Options in Health-Insurance Plans.” Unpublished Manuscript.Google Scholar

  • Lo Sasso, A. T., M. Shah, and B. K. Frogner. 2010. “Health Savings Accounts and Health Care Spending.” Health Services Research 45: 1041–60.CrossrefWeb of ScienceGoogle Scholar

  • Miller, D. P., and J. Yeo. 2018. “The Consequences of a Public Health Insurance Option: Evidence from Medicare Part D.” American Journal of Health Economics, in press.Web of ScienceGoogle Scholar

  • Nevo, A. 2000. “A Practitioner’s Guide to Estimation of Random-Coefficients Logit Models of Demand.” Journal of Economics & Management Strategy 9: 513–48.CrossrefGoogle Scholar

  • Pendzialek, J., D. Simic, and S. Stock. 2016. “Differences in Price Elasticities of Demand for Health Insurance: A Systematic Review.” Health Economics in Prevention and Care 17: 5–21.Google Scholar

  • Petrin, A. 2002. “Quantifying the Benefits of New Products: the Case of the Minivan.” Journal of Political Economy 110: 705–29.CrossrefGoogle Scholar

  • Quan, T., and K. Williams. 2017. “Product Variety, Across-Market Demand Heterogeneity, and the Value of Online Retail.” Unpublished Manuscript.Google Scholar

  • Rasmusen, E. 2006. “The BLP Method of Demand Curve Estimation in Industrial Organization.” Unpublished Manuscript.Google Scholar

  • Royalty, A. B., and N. Solomon. 1999. “Health Plan Choice: Price Elasticities in a Managed Competition Setting.” Journal of Human Resources 34: 1–41.CrossrefGoogle Scholar

  • Sargan, J. D. 1958. “The Estimation of Economic Relationships Using Instrumental Variables.” Econometrica 26: 393–415.CrossrefGoogle Scholar

  • Staiger, D., and J. H. Stock. 1997. “Instrumental Variables Regression with Weak Instruments.” Econometrica 65: 557–86.CrossrefGoogle Scholar

  • Starc, A. 2014. “Insurer Pricing and Consumer Welfare: Evidence from Medigap.” RAND Journal of Economics 45: 198–220.CrossrefWeb of ScienceGoogle Scholar

  • Strombom, B. A., T. C. Buchmueller, and P. J. Feldstein. 2002. “Switching Costs, Price Sensitivity and Health Plan Choice.” Journal of Health Economics 21: 89–116.CrossrefGoogle Scholar

  • Wu, D.-M. 1973. “Alternative Tests of Independence between Stochastic Regressors and Disturbances.” Econometrica 41: 733–50.CrossrefGoogle Scholar

About the article

Published Online: 2020-01-18

Citation Information: The B.E. Journal of Economic Analysis & Policy, 20190153, ISSN (Online) 1935-1682, DOI: https://doi.org/10.1515/bejeap-2019-0153.

Export Citation

© 2020 Walter de Gruyter GmbH, Berlin/Boston.Get Permission

Comments (0)

Please log in or register to comment.
Log in