American insurers are designing products to contain healthcare costs by making consumers financially responsible for their choices. Little is known about how consumers will view these new designs. Our objective is to examine consumer preferences for selected benefit designs.
We used the contingent choice method to assess willingness to pay for six health plan attributes. Our sample included subscribers to individual health insurance products in California, US. We used fitted logistic regression models to explore how preferences for the more generous attributes varied with the additional premium and with the characteristics of the subscriber.
High quality was the most highly valued attribute based on the amounts consumers report they are willing to pay. They were also willing to pay substantial monthly premiums to reduce their overall financial risk. Individuals in lower health were willing to pay more to reduce their financial risk than individuals in better health.
Consumers may prefer tiered-benefit designs to those that involve overall increases in cost sharing. More consumer information is needed to help consumers better evaluate the costs and benefits of their insurance choices.
This is a preview of subscription content, access via your institution.
Buy single article
Instant access to the full article PDF.
Price includes VAT (USA)
Tax calculation will be finalised during checkout.
Robinson JC. Hospital tiers in health insurance: balancing consumer choice with financial incentives. Health Aff (Millwood) 2003 Jan-Jun; Suppl Web Exclusives: W3-135-46
Gabel J, Levitt L, Holve E, et al. Job-based health benefits in 2002: some important trends. Health Aff 2002; 21(5): 143–51
Yegian JM. Tiered hospital networks. Health Aff (Millwood) 2003 Jan-Jun; Suppl Web Exclusives: W3-147-53
Mays GP, Hurley RE, Gorssman JM. Consumers face higher costs as health plans seek to control drug spending. Washington, DC: Center for Studying Health System Change, 2001 Nov
Iglehart JK. Changing health insurance trends. N Engl J Med 2002 Sep; 347(12): 956–62
Scanlon DP, Chernew M, Lave JR. Consumer health plan choice: current knowledge and future directions. Annu Rev Public Health 1997 May; 18: 507–28
Short PF, Taylor AK. Premiums, benefits and employee choice of health insurance options. J Health Econ 1989 Dec; 8(3): 293–311
Buchmueller TC, Feldstein PJ. Consumers’ sensitivity to health plan premiums: evidence from a natural experiment in California. Health Aff 1996; 15(1): 143–51
Royalty AB, Solomon N. Health plan choice: price elasticities in a managed competition setting. J Hum Resour 1999; 34(1): 1–41
McLaughlin CG. Health care consumers: choices and constraints. Med Care Res Rev 1999; 56(1 Suppl.): 24–59
Bridges JF. Stated preference methods in health care evaluation: an emerging methodological paradigm in health economics. Appl Health Econ Health Policy 2003; 2(4): 213–24
Ryan M, Gerard K. Using discrete choice experiments to value health care programmes: current practice and future research reflections. Appl Health Econ Health Policy 2003; 2(1): 55–64
Diener A, O’Brien B, Gafni A. Health care contingent valuation studies: a review and classification of the literature. Health Econ 1998 Jun; 7(4): 313–26
Manning WG, Marquis MS. Health insurance: the tradeoff between risk pooling and moral hazard. J Health Econ 1996 Oct; 15(5): 609–39
Harris KM. How do patients choose physicians? Evidence from a national survey of enrollees in employment-related health plans. Health Serv Res 2003 Apr; 38(2): 711–32
Hershey JC, Kunreuther H, Schwartz JS, et al. Health insurance under competition: would people choose what is expected? Inquiry 1984; 21: 349–60
Granbois DH, Sumers OJ. Primary and secondary validity of consumer purchase probabilities. J Consum Res 1975; 1: 31–8
Dong H, Kouyate B, Cairns J, et al. Willingness-to-pay for community-based insurance in Burkina Faso. Health Econ 2003 Oct; 12(10): 849–62
Hanley N, Ryan M, Wright R. Estimating the monetary value of health care: lessons from environmental economics. Health Econ 2003 Jan; 12(1): 3–16
Carlson JL. Hypothetical surveys versus real commitments: further evidence. Appl Econ Lett 2000 Jul; 7(7): 447–50
Johanneson M, Liljas B, Johansson P. An experimental comparison of dichotomous choice contingent valuation questions and real purchase decisions. Appl Econ 1998 May; 30(5): 643–7
Paradiso M, Trisorio A. The effect of knowledge on the disparity between hypothetical and real willingness to pay. Appl Econ 2001 Sep; 33(11): 1359–64
Cookson R. Willingness to pay methods in health care: a skeptical view. Health Econ 2003 Nov; 12(11): 891–4
Marquis SM, Long SH. Worker demand for health insurance in the non-group market. J Health Econ 1995 May; 14(1): 47–63
Gabel JR, Lo Sasso AT, Rice T. Consumer-driven health plans: are they more than talk now? Health Aff (Millwood) 2002 Jul-Dec; Suppl Web Exclusives: W395-407
Grossman SJ, Stiglitz JE. Information and competitive price systems. Am Econ Rev 1976; 66(2): 246–53
Shaprio BP. The psychology of pricing. Harv Bus Rev 1968; 46: 14–25
Spranca M, Kanouse DE, Elliott M, et al. Do consumer reports of health plan quality affect health plan selection? Health Serv Res 2000 Oct; 35(4): 933–48
This research was carried out under grant no. 01-1520 from the California HealthCare Foundation (CHCF). Any views expressed herein are solely those of the authors and no endorsement by RAND or the CHCF is intended or should be inferred. The authors are grateful to the RAND Survey Group for carrying out the survey. We also thank Al Crego for programming assistance, the Actuarial Research Corporation for providing actuarial estimates of the expected benefits of some of the features we studied and the three participating carriers for assisting us in obtaining the sample used in this study. ## The authors do not have a proprietary, financial or professional interest of any kind that could be construed as influencing the content of this manuscript.
Appendix Refer to Tab5
Appendix Refer to Tab5
About this article
Cite this article
Marquis, M.S., Buntin, M.B., Kapur, K. et al. Using contingent choice methods to assess consumer preferences about health plan design. Appl Health Econ Health Policy 4, 77–86 (2005). https://doi.org/10.2165/00148365-200504020-00002
- Cost Sharing
- Contingent Choice
- Benefit Design
- Monthly Premium
- Premium Difference