Let them Have Choice: Gains from Shifting away from Employer-Sponsored Health Insurance and Toward an Individual Exchange

Most non elderly Americans purchase health insurance through their employers, which sponsor a limited number of plans. Using a panel data set representing over 10 million insured lives, we estimate employees preferences for different health plans and use the estimates to predict their choices if more plans were made available to them on the same terms, i.e. with equivalent subsidies and at large-group prices. Using conservative assumptions, we estimate a median welfare gain of 13% of premiums. A proper accounting of the costs and benefits of a transition from employer-sponsored to individually-purchased insurance should include this nontrivial gain.