The Demand for Employment-Based Health Insurance Plans

We estimate the demand for health plans by employees in 17 Minneapolis firms. The data set has approximately 900 employees who chose a single-coverage health plan and 2,100 employees who chose family coverage. A nested logit model is empirically shown to be the right approach for modeling health plan choice, with freedom to choose your own doctor being the variable that distinguishes health plan nests. Our estimates show that employees are very sensitive to the out-of-pocket premium for each plan, controlling for other plan characteristics. These results are important both for public policy and for employers who offer multiple health plans.