TY - JOUR
T1 - Pricing health benefits
T2 - A cost-minimization approach
AU - Miller, Nolan H.
N1 - Funding Information:
I thank Chris Avery, Pedro Barros, Suzanne Cooper, David Dranove, Bill Encinosa, Karen Eggleston, Jeff Liebman, Eduardo Loyo, Albert Ma, Tom McGuire, Joe Newhouse, Richard Zeckhauser, anonymous referees, and participants at the Boston University/Department of Veterans Affairs Fifth Biennial Conference on the Industrial Organization of Health Care for helpful comments. Financial support of the Department of Veterans Affairs and AHRQ is gratefully acknowledged.
Copyright:
Copyright 2008 Elsevier B.V., All rights reserved.
PY - 2005/9
Y1 - 2005/9
N2 - We study the role of health benefits in an employer's compensation strategy, given the overall goal of minimizing total compensation cost (wages plus health-insurance cost). When employees' health status is private information, the employer's basic benefit package consists of a base wage and a moderate health plan, with a generous plan available for an additional charge. We show that in setting the charge for the generous plan, a cost-minimizing employer should act as a monopolist who sells "health plan upgrades" to its workers, and we discuss ways tax policy can encourage efficiency under cost-minimization and alternative pricing rules.
AB - We study the role of health benefits in an employer's compensation strategy, given the overall goal of minimizing total compensation cost (wages plus health-insurance cost). When employees' health status is private information, the employer's basic benefit package consists of a base wage and a moderate health plan, with a generous plan available for an additional charge. We show that in setting the charge for the generous plan, a cost-minimizing employer should act as a monopolist who sells "health plan upgrades" to its workers, and we discuss ways tax policy can encourage efficiency under cost-minimization and alternative pricing rules.
KW - Adverse selection
KW - Benefits pricing
KW - Employer-provided health insurance
UR - http://www.scopus.com/inward/record.url?scp=23944448897&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=23944448897&partnerID=8YFLogxK
U2 - 10.1016/j.jhealeco.2005.03.001
DO - 10.1016/j.jhealeco.2005.03.001
M3 - Article
C2 - 16129129
AN - SCOPUS:23944448897
SN - 0167-6296
VL - 24
SP - 931
EP - 949
JO - Journal of Health Economics
JF - Journal of Health Economics
IS - 5
ER -