University of Wisconsin at Madison
975 University Ave
Madison, WI 53706
Institutional Affiliation: University of Wisconsin-Madison
NBER Working Papers and Publications
|March 2018||Dominated Options in Health-Insurance Plans|
with Justin R. Sydnor: w24392
Recent studies have found that many people select into health plans with higher coverage (e.g., lower deductibles) even when those plans are financially dominated by other options. We explore whether having dominated options is common by analyzing data on plan designs from the Kaiser Family Foundation Employer Health Benefits Survey for firms that offered employees both a high-deductible (HD) health plan and a lower-deductible (LD) option. In 65% of firms the high-deductible option would result in lower maximum possible health spending for the employee for the year. We estimate that the HD plan financially dominates the LD plan at roughly half of firms across a wide range of possible health spending needs employees might anticipate. The expected savings from selecting the HD plan are typ...