There are two significant caveats to the new model. The first is an adjustment we made to the HDHP benefit design. For this analysis we chose to have the HDHP take-up match our previous analysis for comparison to previous proposed policies. The adjustment we made was to increase the coinsurance rate of the HDHP from 0% to 5%. This is also consistent with more recent plan designs for HDHPs in 2006-7 than early HDHP designs in 2004-5. We did this because our original 0% coinsurance estimates produced an HDHP take-up of roughly 4.5 million covered lives which was greater than the original model estimate by 1.6 million covered lives. However, we recently learned that some market analysts project that HDHP enrollment in the individual health insurance market may actually grow to this level by the end of 2006. We are choosing to keep our revised estimate (3.2 million) for the purpose of comparison. In addition, we feel more comfortable with our results providing a more conservative estimate of HDHP take-up.
A second caveat is that we found greater price elasticity from both premium and cost sharing responses than before. Once again we feel this change may have merit. Our most recent plan choice model produced results suggesting a greater elasticity response from cost sharing than we found previously.15 We are in the process of completing a nested logit model to provide more accurate premium elasticity estimates to verify the increase in elastic response that we suggest. This change, combined with the cost regressions predicting higher premiums for low option PPOs and lower premiums for low option HDHPs, led to greater take-up of HDHPs than before. Once we have newer HDHP plan choice information, we will be able to calibrate the model better.