Project Management

The Impact Of Tort Reform On Employer-Sponsored Health Insurance Premiums

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Executive Summary

The authors evaluate the effect of tort reform on employer-sponsored health insurance premiums by exploiting state-level variation in the timing of reforms. Using a dataset of health plans representing over 10 million Americans annually between 1998 and 2006, they find that caps on non-economic damages, collateral source reform, and joint and several liability reforms reduce premiums by 1 to 2 percent each. These reductions are concentrated in PPOs rather than HMOs, suggesting that can HMOs can reduce "Defensive" healthcare costs even absent tort reform. The results are the first direct evidence that tort reform reduces healthcare costs in aggregate; prior research has focused on particular medical conditions.

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