The effect of report cards on consumer choice in the health insurance market

We test the effect of report cards on consumer choice in the HMO market. Federal employees were provided with report cards on a limited basis in 1995 and then on a widespread basis in 1996. Exploiting this natural experiment, we find that subjective measures of quality and coverage influence plan choices, after controlling for plan premiums, expected out of pocket expenses and service coverages. The effect is stronger within a small sample of new hires compared to a larger sample of existing federal employees. We also find evidence that report cards increase the price elasticity of demand for health insurance. (C) 2002 Elsevier Science B.V. All rights reserved.