Managing Behavioral HazardValue-Based Insurance Design and Inertia

Health insurance may be used as a mechanism for more efficient health care decisions. While value-based insurance design (VBID) aligns cost-sharing with clinical value, whether consumers reduce their medical expenditures is unclear. I study the impact of a new value-based insurance design which decreased copays for primary care physician visits, increased copays for specialist visits, and introduced negative cost-sharing with preventive care incentives to reduce the deductible. I find consumers are persistent in their plan choice and there is entry of younger, new employees into the VBID plan. Old subscribers defaulted into VBID have a greater number of PCP visits while new employees who actively choose VBID have a lower number of specialist visits compared to non-VBID subscribers. To study the demand for this new design and how selection and treatment effects interact with consumers experiencing inertia, I estimate a model of plan choice and level of deductible and investigate responses to counterfactual plan menus which i) reduce the number of plan options, ii) lower the switching cost to zero, and iii) mandate enrollment in the value-based plan. By switching to the value-based plan, enrollees can reduce their premium paid by as much as $4,351 with moderate expected increases in out-of-pocket payments of $85 for subscribers with good health and $245 for those with poor health, on average. These results highlight the importance of active choice coupled with decision aids, targeted information about coverage changes, and strong financial incentives to motivate changes in consumer behavior.


How Does Cost-Sharing Impact Spending Growth and Cost-Effective Treatments? Evidence from Deductibles

with Claudio Lucarelli, Molly Frean, Aliza S. Gordon, and Mark Pauly

Costly new technology, while often beneficial, has been identified as the principal driver of healthcare spending growth. Recent literature has shown high deductible health plans (HDHP) can have an immediate impact on levels of healthcare spending, but their medium and long run effects on spending growth remain unknown. Analyzing a panel of multiple-employer-group claims data from a national insurer, we find that people with HDHPs for four or more years have the same total spending growth as long term enrollees in LDHP’s. We use recent advances in the difference-in-differences literature to account for differential timing of treatment of individuals enrolled in low deductible health plans (LDHPs) switching to high deductible health plans (HDHPs). We observe a significant difference in spending only in the first-year post-switch from a LDHP to a HDHP plan.  HDHPs do, however, reduce spending growth over time for prescription drugs, lowering growth for less cost-effective drugs but not affecting growth in spending on highly cost-effective medicines.


Employer Risk-Adjustment Transitions with Inertial Consumers

(Ben Handel, Nianyi Hong, Lynn M. Hua, and Yuki Ito)

Journal of Risk and Insurance, 2023; 90(1), 93-121

Private Equity Acquisitions of Physician Medical Groups Across Specialties, 2013-2016

(Jane M. Zhu, Lynn M. Hua, Daniel Polsky)

JAMA: The Journal of the American Medical Association, 2020; 323(7), 663–665

Local Area Variation in Morbidity Among Low-Income, Older Adults in the United States

(Maria Polyakova and Lynn M. Hua)

Annals of Internal Medicine, 2019; 171(7), 464–473

Marketplace Plans Provide Risk Protection, But Actuarial Values Overstate Realized Coverage For Most Enrollees

(Maria Polyakova, Lynn M. Hua, and Kate Bundorf)

Health Affairs, 2017; 36(12), 2078-2084

Racial Differences in Awareness of the Affordable Care Act and Application Assistance Among Low-Income Adults in Three Southern States

(Adrian Garcia Mosquiera, Lynn M. Hua, and Benjamin Sommers)

INQUIRY: The Journal of Health Care Organization, Provision, and Financing, 2015; 52