Suppose as a worker your health insurance currently allows you to buy whatever prescription drugs you wish for $2. Then in contract negotiations, it is changed to $10 for generic and $20 for brand name drugs. How would you react and economic analysis would you predict?
Take a shot. What do you think?
Hint: first describe how the insurance company will react. (It would be helpful to know what the insurance parameters were before the contract negotiations. It also would be useful to know if there are alternative insurance options). Then describe how the consumer will react. Then how does the insurance company react to the consumer reaction.