NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Effects of Retiree Health Insurance Plan Characteristics on Retirees' Choice and Employers' Costs

Robert Clark, Melinda Morrill, David Vanderweide

NBER Working Paper No. 19566
Issued in October 2013
NBER Program(s):   HE   LS   PE

To moderate the rate of growth of retiree health insurance costs, employers can modify plans and move retirees into less expensive plans. We examine policy modifications implemented by the North Carolina State Health Plan. We investigate whether incentives produce the desired plan elections and whether these changes, along with cost shifting, produce the expected reductions in cost growth. Using individual-level administrative data, along with aggregated data on expenditures for retirees, we estimate the effects of the introduction and subsequent repeal of a Comprehensive Wellness Initiative for non-Medicare eligible retirees, as well as increases in coinsurance and copayments and the introduction of a premium for all retirees. Over a third of non-Medicare retirees shifted into the least generous plan between June 2009 and December 2012. The level effects on annual costs and unfunded accrued liabilities were relatively modest, but growth rates were diminished. Increases in the retiree premiums reduced projected costs.

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Document Object Identifier (DOI): 10.3386/w19566

Forthcoming: The Effects of Retiree Health Insurance Plan Characteristics on Retirees' Choice and Employers' Costs, Robert Clark, Melinda Morrill, David Vanderweide. in State and Local Health Plans for Active and Retired Public Employees, Clark and Newhouse. 2014

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