Information and Consumer Choice: The Value of Publicized Health Plan Ratings
Information and Consumer Choice: The Value of Publicized Health Plan Ratings
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Publication or External Link
Date
2005
Authors
Jin, Ginger Zhe
Sorensen, Alan T.
Advisor
Citation
Information and Consumer Choice: The Value of Publicized Health Plan Ratings, with Alan Sorensen at Stanford, Journal of Health Economics, March 2006, 25(2): 248-275.
DRUM DOI
Abstract
We use data on the enrollment decisions of federal annuitants to estimate the influence of
publicized ratings on health plan choice. We focus on the impact of ratings disseminated by
the National Committee for Quality Assurance (NCQA), and use our estimates to calculate the
value of the information. Our approach exploits a novel feature of the data—the availability of
nonpublic plan ratings—to correct for a source of bias that is inherent in studies of consumer
responsiveness to information on product quality: since publicized ratings are correlated with
other quality signals known to consumers (but unobserved by researchers), the estimated influence
of ratings is likely to be overstated. We control for this bias by comparing the estimated
impact of publicized ratings to the estimated impact of ratings that were never disclosed. The
results indicate that NCQA’s plan ratings had a meaningful influence on individuals’ choices,
particularly for individuals choosing a plan for the first time. Although we estimate that a very
small fraction of individual decisions were materially affected by the information, for those
that were affected the implied utility gains are substantial.