Suboptimal provision of preventive healthcare due to expected enrollee turnover among private insurers

Authors

  • Bradley Herring

    Corresponding author
    1. Department of Health Policy and Management, Bloomberg School of Public Health, Johns Hopkins University, Baltimore, MD, USA
    • Department of Health Policy and Management, Bloomberg School of Public Health, Johns Hopkins University, 624 North Broadway, Baltimore, MD 21205-1901
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Abstract

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.

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