TY - JOUR
T1 - The effect of tax-exempt out-of-pocket premiums on health plan choice
AU - Dowd, Bryan
AU - Feldman, Roger
AU - Maciejewski, Matthew
AU - Pauly, Mark V.
PY - 2001/12
Y1 - 2001/12
N2 - Market-based health care reform proposals typically rely on 1) consumer choice among competing health plans, 2) premiums paid out-of-pocket for higher priced plans, and 3) a significant out-of-pocket premium-price elasticity of health plan choice. Section 125 of the Internal Revenue Code exempts employee out-of-pocket premiums from personal income taxes and FICA taxes. The predicted effect is attenuation of the out-of-pocket premium-price elasticity of health plan choice. Using 1994 data from a national sample of large public employers, we find that employees are sensitive to out-of-pocket premiums, but tax-exempt out-of-pocket premiums reduce substantially the price elasticity of health plan choice.
AB - Market-based health care reform proposals typically rely on 1) consumer choice among competing health plans, 2) premiums paid out-of-pocket for higher priced plans, and 3) a significant out-of-pocket premium-price elasticity of health plan choice. Section 125 of the Internal Revenue Code exempts employee out-of-pocket premiums from personal income taxes and FICA taxes. The predicted effect is attenuation of the out-of-pocket premium-price elasticity of health plan choice. Using 1994 data from a national sample of large public employers, we find that employees are sensitive to out-of-pocket premiums, but tax-exempt out-of-pocket premiums reduce substantially the price elasticity of health plan choice.
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U2 - 10.17310/ntj.2001.4.03
DO - 10.17310/ntj.2001.4.03
M3 - Article
AN - SCOPUS:0040515874
SN - 0028-0283
VL - 54
SP - 741
EP - 753
JO - National Tax Journal
JF - National Tax Journal
IS - 4
ER -