In: Population Association of America, eds. 2014 Annual Meeting, Population Association of America. Princeton, NJ, USA: Population Association of America.
Cornell University, Ithaca, NY, USA
This paper studies the choice of health insurance following the introduction of a wellness plan packaged with health insurance by a large self-insured employer. More than half of US employers offer a wellness plan as part of benefits to employees in hopes of reducing the total cost of health insurance. Aetna Wellness was introduced in parallel to and on the basis of an existing Aetna health plan. While it was priced much lower than its non-wellness counterparts, the majority of employees actively chose away from the wellness plan. If employees consider the wellness plans as a cost, and do not use its features, the intended cost savings will not materialize. The paper looks at two factors in this puzzle: the effect of peer choices and family health status on plan choice. Using a unique dataset of health insurance plan choice and utilization, I compare two identical plans – one with and one without the wellness program, and focus on a subsample consisting of new employees. I find that peer choices affect own choice of health insurance: a 10% rise in peer enrollment in Aetna Wellness increases the probability of own enrollment in the plan by 1.4% to 3.7%. I use the Charlson index, and an index of medical resource utilization intensity generated by the ACG software developed at Johns Hopkins University to measure family health status. A 1 point rise in the Charlson index leads to up to 4% decline in probability of enrollment in Aetna Wellness. The index captures employees with more severe health conditions. A 1 point rise in the resource utilization band, which captures more routine medical utilization, results in up to 8% rise in probability of enrollment. The results suggest that an effective information campaign of the benefits of a wellness program will increase the employee participation and improve long term outcomes of the plan. The program, however, does not appeal to employees and families with severe medical conditions which might benefit most from regular outpatient care.
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