Information and Consumer Choice: The Value of Publicized Health Plan Ratings

Ginger Zhe Jin, Alan T. Sorensen

NBER Working Paper No. 11514
Issued in August 2005
NBER Program(s):Industrial Organization

We use data on the enrollment decisions of federal annuitants to estimate the influence of publicized

ratings on health plan choice. We focus on the impact of ratings disseminated by the National

Committee for Quality Assurance (NCQA), and use our estimates to calculate the value of the

information. Our approach exploits a novel feature of the data—the availability of nonpublic plan

ratings—to correct for a source of bias that is inherent in studies of consumer responsiveness to

information on product quality: since publicized ratings are correlated with other quality signals

known to consumers (but unobserved by researchers), the estimated influence of ratings is likely to

be overstated. We control for this bias by comparing the estimated impact of publicized ratings to

the estimated impact of ratings that were never disclosed. The results indicate that NCQA’s plan

ratings had a meaningful influence on individuals’ choices, particularly for individuals choosing a

plan for the first time. Although we estimate that a very small fraction of individual decisions were

materially affected by the information, for those that were affected the implied utility gains are


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Document Object Identifier (DOI): 10.3386/w11514

Published: Jin, Ginger Zhe and Alan T. Sorensen. "Information And Consumer Choice: The Value Of Publicized Health Plan Ratings," Journal of Health Economics, 2006, v25(2,Mar), 248-275.

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