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Suboptimal provision of preventive healthcare due to expected enrollee turnover among private insurers
Author(s) -
Herring Bradley
Publication year - 2010
Publication title -
health economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.55
H-Index - 109
eISSN - 1099-1050
pISSN - 1057-9230
DOI - 10.1002/hec.1484
Subject(s) - turnover , business , actuarial science , investment (military) , health care , preventive care , control (management) , rate of return , test (biology) , demographic economics , finance , economics , paleontology , management , politics , political science , law , biology , economic growth
Many preventive healthcare procedures are widely recognized as cost‐effective but have relatively low utilization rates in the US. Because preventive care is a present‐period investment with a future‐period expected financial return, enrollee turnover among private insurers lowers the expected return of this investment. In this paper, I present a simple theoretical model to illustrate the suboptimal provision of preventive healthcare that results from insurers ‘free riding’ off of the provision from others. I also provide an empirical test of this hypothesis using data from the Community Tracking Study's Household Survey. I use lagged market‐level measures of employment‐induced insurer turnover to identify variation in insurers' expectations and test for the effect of turnover on several different measures of medical utilization. As expected, I find that turnover has a significantly negative effect on the utilization of preventive services and has no effect on the utilization of acute services used as a control. Copyright © 2009 John Wiley & Sons, Ltd.