Many current proposals aimed at encouraging competition in the health sector call for changes in the way employer-paid health insurance premiums are treated for tax purposes, and for a multiple choice of health insurance plans. This report presents an empirical analysis of the demand for supplementary health insurance and examines the potential effects of implementing these proposals. Extensive demand for supplementary insurance may dampen the effectiveness of catastrophic or major risk insurance proposals intended to increase patient cost sharing; the analysis provides estimates of the size of this demand.
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