Group Health Insurance: A Hedonic Price Approach

The authors examine the premium consequences of alternative health insurance provisions by estimating pricing regressions for group insurance with data on 9, 019 fee-for-service plans offered by larger firms in the private sector. They find that cost-sharing at the point of purchase, especially for hospital care, significantly lowers fee-for-service premiums. However, some aspects of plan design that are often touted as cost-reducing, such as self-insuring or offering employees the option to join a health maintenance organization, are found to increase premiums. Coverage of alcoholism/chemical dependency treatments, inpatient mental health care, and psychologists' services, which are mandated in many states, are found to be expensive.