Data from four plants of a single company are used to examine differences in health plan selection in 1989 among employees offered a choice of plans. A 10% increase in the traditional fee-for-service (FFS) plan premium reduced the fraction choosing that plan by 4–9 percentage points, and a doubling of the deductible reduced the plan's market share by 3–4 percentage points. Most workers rejecting such a plan chose the high-premium prepaid plans, which offer the lowest cost-sharing provisions. On the other hand, attaching a modest deductible to prepaid plans reduced their market share by 3–4 percentage points and increased participation in the traditional FFS plan, which requires a relatively high premium but low cost-sharing. The authors also find that increases in real salaries and in the age of the work force boosted employee choice of the traditional FFS plan.
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