The impact of subsidies on deductible choice in health insurance
Type
journal article
Date Issued
2022-08
Author(s)
Abstract
Low-income individuals respond to subsidies that constitute a combination of income effect and subsidy effect. This paper disentangles the two effects by exploring three variations in Switzerland. First, I start by using the kinked relationship between prior earnings and subsidy levels to identify the effect of the subsidies using a regression-kink discontinuity design. Empirically, I document that subsidies increase the demand for low-deductible insurance contracts. I find that 40 percent of subsidy recipients select the lowest deductible plan, compared to 30 percent in the non-subsidy high-income group.Second, subsidy levels are fixed coupon conditional on the lowest deductible plan(most generous plan). Individuals face zero out-of-pocket premiums for higher deductible plans as subsidy levels increase. I explore discontinuities in the availability of zero-premium plans to examine the pricing effect(substitution effect) of subsidies on deductible choices.
Language
English
HSG Classification
contribution to scientific community
Refereed
No
Subject(s)
Eprints ID
267572