The Response to Dynamic Incentives in Insurance Contracts with a Deductible: Evidence from a Differences-in-Regression-Discontinuities Design

62 Pages Posted: 6 Apr 2020 Last revised: 29 Sep 2022

See all articles by Tobias J. Klein

Tobias J. Klein

Tilburg University - Department of Econometrics & Operations Research; Tilburg University - Center for Economic Research (CentER); IZA Institute of Labor Economics; Netspar; Tilburg Law and Economics Center (TILEC)

Martin Salm

Tilburg University

Suraj Upadhyay

Tilburg University

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Abstract

We develop a new approach to quantify how patients respond to dynamic incentives in health insurance contracts with a deductible. Our approach exploits two sources of variation in a differences-in-regression-discontinuities design: deductible contracts reset at the beginning of the year, and cost-sharing limits change over the years. Using rich claims-level data from a large Dutch health insurer we find that individuals are forward-looking. Changing dynamic incentives by increasing the deductible by €100 leads to a reduction in healthcare spending of around 3% on the first days of the year and 6% at the annual level. The response to dynamic incentives is an important part of the overall effect of cost-sharing schemes on healthcare expenditures- much more so than what the previous literature has suggested.

Keywords: health insurance, patient cost-sharing, dynamic incentives

JEL Classification: I13, H51

Suggested Citation

Klein, Tobias J. and Salm, Martin and Upadhyay, Suraj, The Response to Dynamic Incentives in Insurance Contracts with a Deductible: Evidence from a Differences-in-Regression-Discontinuities Design. IZA Discussion Paper No. 13108, Available at SSRN: https://ssrn.com/abstract=3568312

Tobias J. Klein (Contact Author)

Tilburg University - Department of Econometrics & Operations Research ( email )

Tilburg, 5000 LE
Netherlands

HOME PAGE: http://center.uvt.nl/staff/klein/index.html

Tilburg University - Center for Economic Research (CentER)

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Tilburg, 5000 LE
Netherlands

IZA Institute of Labor Economics ( email )

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Germany

Netspar

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Tilburg Law and Economics Center (TILEC)

Warandelaan 2
Tilburg, 5000 LE
Netherlands

Martin Salm

Tilburg University

P.O. Box 90153
Tilburg, DC 5000 LE
Netherlands

Suraj Upadhyay

Tilburg University

P.O. Box 90153
Tilburg, DC 5000 LE
Netherlands

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