Department of Economics and Business Economics

Spot price biases in non-linear health insurance contracts

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Spot price biases in non-linear health insurance contracts. / Simonsen, Marianne; Skipper, Lars; Skipper, Niels; Christensen, Anne Illemann.

In: Journal of Public Economics, Vol. 203, 104508, 11.2021.

Research output: Contribution to journal/Conference contribution in journal/Contribution to newspaperJournal articleResearchpeer-review

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Simonsen, Marianne ; Skipper, Lars ; Skipper, Niels ; Christensen, Anne Illemann. / Spot price biases in non-linear health insurance contracts. In: Journal of Public Economics. 2021 ; Vol. 203.

Bibtex

@article{0fb5e96a2e86492686aff9b70cfcb2ce,
title = "Spot price biases in non-linear health insurance contracts",
abstract = "We study an apparent schism in the literature concerned with non-linear health insurance plans: consumers exposed to the same type of policy appear forward-looking and rational in their response to one policy feature – the end-of-year coverage reset – but not to another – that current prices depend on the year-to-date spending in a non-linear fashion. We exploit policy variation from within a unified institutional environment and uses of population-wide data. We replicate both phenomena empirically: consumers both shift the timing of their purchases in response to the end-of-year reset and react excessively to spot prices during the coverage year. Importantly, however, we show that also the end-of-year behavior is due to over-attention to short-run prices. Specifically, consumers respond entirely to the large and salient change in the spot price in connection with the reset of the coverage year, conditional on the true expected price change. We find that liquidity constraints, rather than plan literacy and cognitive decline are important for understanding the spot price bias.",
keywords = "Intertemporal shifting, Non-linear pricing, Prescription drugs",
author = "Marianne Simonsen and Lars Skipper and Niels Skipper and Christensen, {Anne Illemann}",
note = "Publisher Copyright: {\textcopyright} 2021 Elsevier B.V.",
year = "2021",
month = nov,
doi = "10.1016/j.jpubeco.2021.104508",
language = "English",
volume = "203",
journal = "Journal of Public Economics",
issn = "0047-2727",
publisher = "Elsevier BV",

}

RIS

TY - JOUR

T1 - Spot price biases in non-linear health insurance contracts

AU - Simonsen, Marianne

AU - Skipper, Lars

AU - Skipper, Niels

AU - Christensen, Anne Illemann

N1 - Publisher Copyright: © 2021 Elsevier B.V.

PY - 2021/11

Y1 - 2021/11

N2 - We study an apparent schism in the literature concerned with non-linear health insurance plans: consumers exposed to the same type of policy appear forward-looking and rational in their response to one policy feature – the end-of-year coverage reset – but not to another – that current prices depend on the year-to-date spending in a non-linear fashion. We exploit policy variation from within a unified institutional environment and uses of population-wide data. We replicate both phenomena empirically: consumers both shift the timing of their purchases in response to the end-of-year reset and react excessively to spot prices during the coverage year. Importantly, however, we show that also the end-of-year behavior is due to over-attention to short-run prices. Specifically, consumers respond entirely to the large and salient change in the spot price in connection with the reset of the coverage year, conditional on the true expected price change. We find that liquidity constraints, rather than plan literacy and cognitive decline are important for understanding the spot price bias.

AB - We study an apparent schism in the literature concerned with non-linear health insurance plans: consumers exposed to the same type of policy appear forward-looking and rational in their response to one policy feature – the end-of-year coverage reset – but not to another – that current prices depend on the year-to-date spending in a non-linear fashion. We exploit policy variation from within a unified institutional environment and uses of population-wide data. We replicate both phenomena empirically: consumers both shift the timing of their purchases in response to the end-of-year reset and react excessively to spot prices during the coverage year. Importantly, however, we show that also the end-of-year behavior is due to over-attention to short-run prices. Specifically, consumers respond entirely to the large and salient change in the spot price in connection with the reset of the coverage year, conditional on the true expected price change. We find that liquidity constraints, rather than plan literacy and cognitive decline are important for understanding the spot price bias.

KW - Intertemporal shifting

KW - Non-linear pricing

KW - Prescription drugs

UR - http://www.scopus.com/inward/record.url?scp=85115762324&partnerID=8YFLogxK

U2 - 10.1016/j.jpubeco.2021.104508

DO - 10.1016/j.jpubeco.2021.104508

M3 - Journal article

AN - SCOPUS:85115762324

VL - 203

JO - Journal of Public Economics

JF - Journal of Public Economics

SN - 0047-2727

M1 - 104508

ER -