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American Economic Journal: Economic Policy: Vol. 5 No. 1 (February 2013)

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Let Them Have Choice: Gains from Shifting Away from Employer-Sponsored Health Insurance and toward an Individual Exchange

Article Citation

Dafny, Leemore, Kate Ho, and Mauricio Varela. 2013. "Let Them Have Choice: Gains from Shifting Away from Employer-Sponsored Health Insurance and toward an Individual Exchange." American Economic Journal: Economic Policy, 5(1): 32-58.

DOI: 10.1257/pol.5.1.32

Abstract

Most nonelderly Americans purchase health insurance through their employers, which sponsor a limited number of plans. Using a panel dataset representing over ten million insured lives, we estimate employees' preferences for different health plans and use the estimates to predict their choices if more plans were made available to them on the same terms, i.e., with equivalent subsidies and at large-group prices. Using conservative assumptions, we estimate a median welfare gain of 13 percent of premiums. A proper accounting of the costs and benefits of a transition from employer-sponsored to individually-purchased insurance should include this nontrivial gain. (JEL G22, I13, J32)

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Authors

Dafny, Leemore (Northwestern U)
Ho, Kate (Columbia U)
Varela, Mauricio (U AZ)

JEL Classifications

G22: Insurance; Insurance Companies
I13: Health Insurance, Public and Private
J32: Nonwage Labor Costs and Benefits; Private Pensions

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