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This paper assesses the factors influencing the movement of people across health plans. The authors distinguish three types of cost-related transitions: adverse selection, the movement of the less healthy to more generous plans; adverse retention, the tendency for people to stay where they are when they get sick; and aging in place, where lack of all movement makes plans with initially older enrollees increase in cost over time. Using data from the Group Insurance Commission in Massachusetts, they show that aging in place and adverse selection are both quantitatively important. Each can materially impact equilibrium enrollments, especially when premiums to enrollees reflect these costs.
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