exogenous change in university policy. They estimated the out-of-pocket premium elasticity of
demand for the PPO plan to be –0.3 in the first year and –0.6 in the second year. Using a similar
natural experiment design and data from the University of California system, Buchmueller and
Feldstein (1997) estimated that 26 percent of enrollees would switch to another plan when the
employee share of premiums for one plan rose by $10 per month.
Atherly et al. (2005) considering sensitivity to price among enrollees in PPO plans versus
HMOs. They concluded that PPO enrollees were more sensitive to a change in price than HMO
enrollees, but only with respect to enrolling in another PPO option; PPO enrollees were unlikely
to switch to an HMO.
Finally, Parente et al. (2004, 2005) are among a very few researchers who have conducted
early analyses of the price elasticity of demand for CDHPs. Parente et al. (2004) estimated a
health plan choice equation for University of Minnesota employees, who in 2002 were offered a
CDHP and three alternative health plans. Measuring the premium elasticity as the percentage
change in the probability of choosing the CDHP in response to a 1-percent change in the tax-
adjusted out-of-pocket premium, they estimated an elasticity of –0.786 among family-contract
employees with no chronic condition. This estimate is much higher than the estimated premium
elasticity (–0.155) among same types of employees who chose the HMO option.
Parente, et al. (2005) used a subsequently larger sample of pooled health plan choice data
from three large employers participating in a Robert Wood Johnson Foundation (RWJF) funded
study of CDHPs to estimate both own-price elasticity and cross-price elasticity for the take-up of
any health insurance. Focusing on the Health Reimbursement Account (HRA) option, they
(–0.92), an coinsurance rate elasticity (–0.54), an elasticity with respect to the difference (or
“doughnut hole”) between the deductible and the health account (–0.24), and an elasticity with