Question
To see ones preferred physician, a worker must enroll in its firms PPO health insurance plan at a cost of $400 per month. If one
To see ones preferred physician, a worker must enroll in its firms PPO health insurance plan at a cost of $400 per month. If one is willing to see any innetwork physician, the worker can enroll in the firms HMO health insurance plan. The HMO plan is offered for free to the firms employees as the HMO plan is substantially cheaper for the firm even when workers dont pay a monthly premium. The firm wonders how worker behavior might change if it charged more for the PPO plan. To get at this, the CEO decides to increase the PPO premium to $600 per month for all of its employees working at its plant in Iowa while keeping the price at $400 per month for all of its employees working at its plant in Illinois. Before the PPO premium was increased in Iowa, 34.9% of employees in Iowa were on the PPO plan while 32.5% of employees in Illinois were on the PPO plan. A year after the premium changed in Iowa, 24.3% of employees in Iowa were on the PPO plan while 29.7% of employees in Illinois were on the PPO plan. Provide a difference-in-differences estimate of the effect increasing the PPO premium from $400 to $600 has on the behavior of employees. Provide a table that demonstrates clearly how you are arriving at this number.
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