Factor affecting the choice between two prepaid plans

Abstract

This study examines the factors affecting the choice between two comprehensive prepaid plans of medical care available to the staff of Stanford University. One is a Kaiser plan, offered since 1969. Under the other (Clinic plan for short), medical services are provided by a predominantly fee-for-service group practice and hospital services are covered by a standard Blue Cross hospital policy; the Clinic plan has been available since the 1950s. The Kaiser plan has only a token copayment for office and home visit while the Clinic plan has a 25 per cent coinsurance provision applying to all physician and outpatient ancillary services. It was found that the two major factors affecting choice were income and distance to the provider. The preference for the Kaiser plan increased as income decreased. Similarly, as distance from the Clinic increased and distance from a Kaiser facility decreased, the preference for the Kaiser plan increased. However, proximity to the provider was a more important factor for the higher-income Clinic plan subscribers. The data also show that the longer availability of the Clinic plan had a long-term effect on enrollment. A substantial proportion of long time Stanford employees who might have been expected to prefer the Kaiser plan stayed with the Clinic plan.