The Role of Insurers in Health Care Spending and Production: Evidence from Utah

Private health insurers play a central role in determining the cost and quantity of health care in the United States. Despite this centrality, there has been limited empirical work studying how insurers differentially affect spending and consumption, especially for expensive and pervasive chronic conditions. We use hundreds of natural experiments involving employers switching their primary health insurer, together with a movers design, to estimate these causal effects. We find meaningful differences in total cost and prices for medical and pharmaceutical spending. Within-person changes in spending caused by forced reassignment across pairs of insurers, holding fixed plan generosity, are as large as 30% of total medical spending and 37% of drug spending. We also find substantial dispersion in insurer causal effects on health care spending and quantities for patients with diabetes, hypertension, and other chronic conditions. We find strong evidence for drug offsets as insurers who causally increase drug utilization also reduce medical costs and quantities overall and by condition. Finally, we find that employers do not select plans that reduce costs for their employees based on the match between employee conditions and estimated plan treatment effects, leaving significant cost savings on the table.