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Geruso M, Layton TJ, McCormack G, Shepard M. The Two-Margin Problem in Insurance Markets. THE REVIEW OF ECONOMICS AND STATISTICS 2023; 105:237-257. [PMID: 37193577 PMCID: PMC10181796 DOI: 10.1162/rest_a_01070] [Citation(s) in RCA: 2] [Impact Index Per Article: 2.0] [Reference Citation Analysis] [Abstract] [Grants] [Track Full Text] [Subscribe] [Scholar Register] [Indexed: 05/18/2023]
Abstract
Insurance markets often feature consumer sorting along both an extensive margin (whether to buy) and an intensive margin (which plan to buy). We present a new graphical theoretical framework that extends a workhorse model to incorporate both selection margins simultaneously. A key insight from our framework is that policies aimed at addressing one margin of selection often involve an economically meaningful trade-off on the other margin in terms of prices, enrollment, and welfare. Using data from Massachusetts, we illustrate these trade-offs in an empirical sufficient statistics approach that is tightly linked to the graphical framework we develop.
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2
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Zuhair M, Roy RB. Eliciting relative preferences for the attributes of health insurance schemes among rural consumers in India. INTERNATIONAL JOURNAL OF HEALTH ECONOMICS AND MANAGEMENT 2022; 22:443-458. [PMID: 35394574 DOI: 10.1007/s10754-022-09327-8] [Citation(s) in RCA: 0] [Impact Index Per Article: 0] [Reference Citation Analysis] [Abstract] [Key Words] [MESH Headings] [Track Full Text] [Subscribe] [Scholar Register] [Received: 12/06/2018] [Accepted: 03/12/2022] [Indexed: 06/14/2023]
Abstract
There is a limited understanding of the preferences of rural consumers in India for health insurance schemes. In this article, we investigate the preferences of the rural population for the attributes of a health insurance scheme by implementing a discrete choice experiment (DCE). We identified six attributes through qualitative and quantitative study: enrollment, management, benefit package, coverage, transportation facility, and monthly premium. A D-efficient design of 18 choices has been constructed, each comprising two health insurance choices. We collected the representative sample from 675 household heads of the rural population through personal interviews. The preferences for the attributes and attribute levels were estimated using the multinomial logit (MNL) and random-parameter logit (RPL) models. The analysis shows that all attribute levels significantly affect the choice behavior (P < 0.05). The relative order of preferences for attributes are; enrollment, benefit package, monthly premium, management, coverage, and transportation.
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Affiliation(s)
- Mohd Zuhair
- Department of Computer Science and Engineering, Institute of Technology, Nirma University, Ahmedabad, Gujarat, India.
| | - Ram Babu Roy
- Indian Institute of Technology Kharagpur, Kharagpur, West Bengal, India
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3
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Myerson R, Tilipman N, Feher A, Li H, Yin W, Menashe I. Personalized Telephone Outreach Increased Health Insurance Take-Up For Hard-To-Reach Populations, But Challenges Remain. Health Aff (Millwood) 2022; 41:129-137. [PMID: 34982628 PMCID: PMC8844881 DOI: 10.1377/hlthaff.2021.01000] [Citation(s) in RCA: 8] [Impact Index Per Article: 4.0] [Reference Citation Analysis] [Abstract] [MESH Headings] [Grants] [Track Full Text] [Download PDF] [Figures] [Journal Information] [Subscribe] [Scholar Register] [Indexed: 12/28/2022]
Abstract
We tested the impact of personalized telephone calls from service center representatives on health plan enrollment in California's Affordable Care Act Marketplace, Covered California, using a randomized controlled trial. The study sample included 79,522 consumers who had applied but not selected a plan. Receiving a call increased enrollment by 2.7 percentage points (22.5 percent) overall. Among subgroups, receiving a call significantly increased enrollment among consumers with income below 200 percent of the federal poverty level (4.0 percentage points or 47.6 percent for consumers with incomes below 150 percent of poverty and 4.0 percentage points or 36.4 percent for consumers with incomes of 150-199 of poverty), as well as those who were referred from Medicaid (2.9 percentage points or 53.7 percent), those ages 30-50 (2.4 percentage points or 23.3 percent) or older than age 50 (5.1 percentage points or 34.2 percent), those who were Hispanic (2.3 percentage points or 31.1 percent), and those whose preferred spoken language was Spanish (3.2 percentage points or 74.4 percent) or English (2.6 percentage points or 18.6 percent). The intervention provided a two-to-one return on investment. Yet absolute enrollment in the target population remained low; persistent enrollment barriers may have limited the intervention's impact. These findings inform implementation of the American Rescue Plan Act of 2021, which expands eligibility for subsidized coverage.
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Affiliation(s)
- Rebecca Myerson
- Rebecca Myerson, University of Wisconsin-Madison, Madison, Wisconsin
| | - Nicholas Tilipman
- Nicholas Tilipman, University of Illinois at Chicago, Chicago, Illinois
| | - Andrew Feher
- Andrew Feher, Covered California, Sacramento, California
| | - Honglin Li
- Honglin Li, University of Wisconsin-Madison
| | - Wesley Yin
- Wesley Yin, University of California Los Angeles, Los Angeles, California
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4
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Abaluck J, Bravo MC, Hull P, Starc A. Mortality Effects and Choice Across Private Health Insurance Plans. THE QUARTERLY JOURNAL OF ECONOMICS 2021; 136:1557-1610. [PMID: 34475592 PMCID: PMC8409169 DOI: 10.1093/qje/qjab017] [Citation(s) in RCA: 10] [Impact Index Per Article: 3.3] [Reference Citation Analysis] [Abstract] [Grants] [Track Full Text] [Subscribe] [Scholar Register] [Indexed: 05/20/2023]
Abstract
Competition in health insurance markets may fail to improve health outcomes if consumers are not able to identify high quality plans. We develop and apply a novel instrumental variables framework to quantify the variation in causal mortality effects across plans and how much consumers attend to this variation. We first document large differences in the observed mortality rates of Medicare Advantage plans within local markets. We then show that when plans with high (low) mortality rates exit these markets, enrollees tend to switch to more typical plans and subsequently experience lower (higher) mortality. We derive and validate a novel "fallback condition" governing the subsequent choices of those affected by plan exits. When the fallback condition is satisfied, plan terminations can be used to estimate the relationship between observed plan mortality rates and causal mortality effects. Applying the framework, we find that mortality rates unbiasedly predict causal mortality effects. We then extend our framework to study other predictors of plan mortality effects and estimate consumer willingness to pay. Higher spending plans tend to reduce enrollee mortality, but existing quality ratings are uncorrelated with plan mortality effects. Consumers place little weight on mortality effects when choosing plans. Good insurance plans dramatically reduce mortality, and redirecting consumers to such plans could improve beneficiary health.
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Affiliation(s)
| | | | | | - Amanda Starc
- The Kellogg School of Management, Northwestern University, and NBER
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5
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Powell D, Goldman D. Disentangling Moral Hazard and Adverse Selection in Private Health Insurance. JOURNAL OF ECONOMETRICS 2021; 222:141-160. [PMID: 33716385 PMCID: PMC7945045 DOI: 10.1016/j.jeconom.2020.07.030] [Citation(s) in RCA: 6] [Impact Index Per Article: 2.0] [Reference Citation Analysis] [Abstract] [Key Words] [Grants] [Track Full Text] [Subscribe] [Scholar Register] [Indexed: 06/12/2023]
Abstract
Moral hazard and adverse selection create inefficiencies in private health insurance markets and understanding the relative importance of each factor is critical for addressing these inefficiencies. We use claims data from a large firm which changed health insurance plan options to isolate moral hazard from plan selection, estimating a discrete choice model to predict household plan preferences and attrition. Variation in plan preferences identifies the differential causal impact of each health insurance plan on the entire distribution of medical expenditures. Our estimates imply that 53% of the additional medical spending observed in the most generous plan in our data relative to the least generous is due to adverse selection. We find that quantifying adverse selection by using prior medical expenditures overstates the true magnitude of selection due to mean reversion. We also statistically reject that individual health care consumption responds solely to the end-of-the-year marginal price.
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Affiliation(s)
| | - Dana Goldman
- University of Southern California, Leonard D. Schaeffer Center for Health Policy and Economics
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6
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Wright DR, Sinaiko AD, Galbraith AA. Preferences and Trade-offs for Health Insurance Plan Decisions: You Can’t Always Get What You Want. JAMA HEALTH FORUM 2020; 1:e200849. [DOI: 10.1001/jamahealthforum.2020.0849] [Citation(s) in RCA: 0] [Impact Index Per Article: 0] [Reference Citation Analysis] [Track Full Text] [Journal Information] [Subscribe] [Scholar Register] [Indexed: 11/14/2022] Open
Affiliation(s)
- Davene R. Wright
- Department of Population Medicine, Harvard Medical School and Harvard Pilgrim Health Care Institute, Boston, Massachusetts
| | - Anna D. Sinaiko
- Department of Health Policy and Management, Harvard School of Public Health, Boston, Massachusetts
| | - Alison A. Galbraith
- Department of Population Medicine, Harvard Medical School and Harvard Pilgrim Health Care Institute, Boston, Massachusetts
- Division of General Pediatrics, Boston Children’s Hospital, Boston, Massachusetts
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7
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Drake C. What are consumers willing to pay for a broad network health plan?: Evidence from covered California. JOURNAL OF HEALTH ECONOMICS 2019; 65:63-77. [PMID: 30981153 DOI: 10.1016/j.jhealeco.2018.12.003] [Citation(s) in RCA: 5] [Impact Index Per Article: 1.0] [Reference Citation Analysis] [Abstract] [Key Words] [MESH Headings] [Track Full Text] [Subscribe] [Scholar Register] [Received: 05/23/2018] [Revised: 11/30/2018] [Accepted: 12/15/2018] [Indexed: 06/09/2023]
Abstract
Health Insurance Marketplaces have received considerable attention for their narrow network health plans. Yet, little is known about consumer tastes for network breadth and how they affect plan selection. I estimate demand for health plans in California's Marketplace, Covered California. Using 2017 individual enrollment data and provider network directories, I develop a geospatial measure of network breadth that reflects the physical locations of households and network providers. I find that households are sensitive to network breath in their plan choices. Mean willingness to pay for a broad network plan relative to a narrow network plan, defined as a two standard deviation, 17.44 percentage point increase in network breadth, is $45.83 in post-subsidy monthly premiums. Variation in WTP indicates a selection mechanism exists whereby older households sort into broader network plans. I also find that households are highly premium sensitive, which may be a result of plan standardization in Covered California.
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Affiliation(s)
- Coleman Drake
- Department of Health Policy and Management, Graduate School of Public Health, University of Pittsburgh, A664 Public Health, 130 DeSoto Street, 15261, Pittsburgh, PA, United States.
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8
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McGarry BE, Maestas N, Grabowski DC. Simplifying The Medicare Plan Finder Tool Could Help Older Adults Choose Lower-Cost Part D Plans. Health Aff (Millwood) 2018; 37:1290-1297. [PMID: 30080456 DOI: 10.1377/hlthaff.2018.0145] [Citation(s) in RCA: 7] [Impact Index Per Article: 1.2] [Reference Citation Analysis] [Abstract] [Key Words] [Track Full Text] [Journal Information] [Subscribe] [Scholar Register] [Indexed: 11/05/2022]
Abstract
Helping older adults make good plan choices is a persistent challenge of the Medicare prescription drug (Part D) program. The Centers for Medicare and Medicaid Services (CMS) provides an internet-based decision support tool (Plan Finder), but this appears to have had limited effect in part because the tool is complex and difficult to interpret. This study used a randomized experiment with hypothetical Part D plan choices to test the effect of simplifying the default amount of financial information provided on Plan Finder on people's ability to select low-cost plans. Reducing the amount of financial information displayed results in the selection of lower-cost plans, with no accompanying decrease in average plan quality or pharmacy network size but an increase in the take-up of convenience options such as a mail-order pharmacy. These modifications to the current Plan Finder design have the potential to improve the tool's usability and beneficiaries' plan choices in the Part D market.
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Affiliation(s)
- Brian E McGarry
- Brian E. McGarry ( ) is a postdoctoral fellow in health economics and policy at Harvard Medical School, in Boston, Massachusetts
| | - Nicole Maestas
- Nicole Maestas is an associate professor of health care policy in the Department of Health Care Policy, Harvard Medical School
| | - David C Grabowski
- David C. Grabowski is a professor in the Department of Health Care Policy, Harvard Medical School
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Handel B, Schwartzstein J. Frictions or Mental Gaps: What’s Behind the Information We (Don’t) Use and When Do We Care? THE JOURNAL OF ECONOMIC PERSPECTIVES : A JOURNAL OF THE AMERICAN ECONOMIC ASSOCIATION 2018; 32:155-178. [PMID: 29693346 DOI: 10.1257/jep.32.1.155] [Citation(s) in RCA: 7] [Impact Index Per Article: 1.2] [Reference Citation Analysis] [Abstract] [MESH Headings] [Track Full Text] [Subscribe] [Scholar Register] [Indexed: 06/08/2023]
Abstract
Consumers suffer significant losses from not acting on available information. These losses stem from frictions such as search costs, switching costs, and rational inattention, as well as what we call mental gaps resulting from wrong priors/worldviews, or relevant features of a problem not being top of mind. Most research studying such losses does not empirically distinguish between these mechanisms. Instead, we show that most highly cited papers in this area presume one mechanism underlies consumer choices and assume away other potential explanations, or collapse many mechanisms together. We discuss the empirical difficulties that arise in distinguishing between different mechanisms, and some promising approaches for making progress in doing so. We also assess when it is more or less important for researchers to distinguish between these mechanisms. Approaches that seek to identify true value from demand, without specifying mechanisms behind this wedge, are most useful when researchers are interested in evaluating allocation policies that strongly steer consumers towards better options with regulation, traditional policy instruments, and defaults. On the other hand, understanding the precise mechanisms underlying consumer losses is essential to predicting the impact of mechanism policies aimed primarily at reducing specific frictions or mental gaps without otherwise steering consumers. We make the case that papers engaging with these questions empirically should be clear about whether their analyses distinguish between mechanisms behind poorly informed choices, and what that implies for the questions they can answer. We present examples from several empirical contexts to highlight these distinctions.
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Andersen M. Constraints on Formulary Design Under the Affordable Care Act. HEALTH ECONOMICS 2017; 26:e160-e178. [PMID: 28233420 DOI: 10.1002/hec.3491] [Citation(s) in RCA: 2] [Impact Index Per Article: 0.3] [Reference Citation Analysis] [Abstract] [Key Words] [MESH Headings] [Track Full Text] [Subscribe] [Scholar Register] [Received: 07/05/2016] [Revised: 09/30/2016] [Accepted: 01/16/2017] [Indexed: 06/06/2023]
Abstract
I study the effect of prescription drug essential health benefits (EHB) requirements from the Affordable Care Act on prescription drug formularies of health insurance marketplace plans. The EHB regulates the number of drugs covered but leaves other dimensions (cost sharing and utilization management) of the formulary unregulated. Using data on almost all formularies in the country, I demonstrate that requiring insurers to cover one additional drug adds 0.22 drugs (3.3%) to the average formulary, mostly owing to firms increasing the number of drugs covered to comply with the EHB requirement. The EHB requirement also increases the probability that a drug is subject to utilization management and is assigned to a higher (more costly) formulary tier. My results suggest that newly covered drugs are 22.3 percentage points more likely to be subject to utilization management, compared to 36.7% for the average covered drug. Using formularies for Medicare Advantage plans, which are subject to uniform, nationwide benefit design standards, and the formulary status of newly approved drugs that do not satisfy the EHB requirement, I reject the hypotheses that consumer demand or effects on plan entry can explain my results. Copyright © 2017 John Wiley & Sons, Ltd.
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Affiliation(s)
- Martin Andersen
- Department of Economics, University of North Carolina at Greensboro, Greensboro, NC, USA
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11
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Marzilli Ericson KM, Kingsdale J, Layton T, Sacarny A. Nudging Leads Consumers In Colorado To Shop But Not Switch ACA Marketplace Plans. Health Aff (Millwood) 2017; 36:311-319. [DOI: 10.1377/hlthaff.2016.0993] [Citation(s) in RCA: 17] [Impact Index Per Article: 2.4] [Reference Citation Analysis] [Track Full Text] [Journal Information] [Subscribe] [Scholar Register] [Indexed: 11/05/2022]
Affiliation(s)
- Keith M. Marzilli Ericson
- Keith M. Marzilli Ericson is an assistant professor of markets, public policy, and law in the Questrom School of Business at Boston University, in Massachusetts, and a faculty research fellow at the National Bureau of Economic Research, in Cambridge, Massachusetts
| | - Jon Kingsdale
- Jon Kingsdale is an associate professor of the practice in the Department of Health Law, Policy, and Management, School of Public Health, at Boston University, and director of the Wakely Consulting Group, in Boston
| | - Tim Layton
- Tim Layton is an assistant professor of health care policy at Harvard Medical School, in Boston
| | - Adam Sacarny
- Adam Sacarny (
) is an assistant professor in the Department of Health Policy and Management at the Mailman School of Public Health, Columbia University, in New York City; a faculty research fellow at the National Bureau of Economic Research; and an affiliate at the Abdul Latif Jameel Poverty Action Lab (J-PAL), in Cambridge
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12
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Ericson KM, Sydnor J. The Questionable Value of Having a Choice of Levels of Health Insurance Coverage. THE JOURNAL OF ECONOMIC PERSPECTIVES : A JOURNAL OF THE AMERICAN ECONOMIC ASSOCIATION 2017; 31:51-72. [PMID: 29465216 DOI: 10.1257/jep.31.4.51] [Citation(s) in RCA: 9] [Impact Index Per Article: 1.3] [Reference Citation Analysis] [Abstract] [MESH Headings] [Track Full Text] [Subscribe] [Scholar Register] [Indexed: 06/08/2023]
Abstract
In most health insurance markets in the United States, consumers have substantial choice about their health insurance plan. However additional choice is not an unmixed blessing as it creates challenges related to both consumer confusion and adverse selection. There is mounting evidence that many people have difficulty understanding the value of insurance coverage, like evaluating the relative benefits of lower premiums versus lower deductibles. Also, in most US health insurance markets, people cannot be charged different prices for insurance based on their individual level of health risk. This creates the potential for well-known problems of adverse selection because people will often base the level of health insurance coverage they choose partly on their health status. In this essay, we examine how the forces of consumer confusion and adverse selection interact with each other and with market institutions to affect how valuable it is to have multiple levels of health insurance coverage available in the market.
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Affiliation(s)
| | - Justin Sydnor
- School of Business, University of Wisconsin, Madison, Wisconsin
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13
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Gruber J. Delivering Public Health Insurance Through Private Plan Choice in the United States. THE JOURNAL OF ECONOMIC PERSPECTIVES : A JOURNAL OF THE AMERICAN ECONOMIC ASSOCIATION 2017; 31:3-22. [PMID: 29465214 DOI: 10.1257/jep.31.4.3] [Citation(s) in RCA: 12] [Impact Index Per Article: 1.7] [Reference Citation Analysis] [Abstract] [MESH Headings] [Track Full Text] [Subscribe] [Scholar Register] [Indexed: 06/08/2023]
Abstract
The United States has seen a sea change in the way that publicly financed health insurance coverage is provided to low-income, elderly, and disabled enrollees. When programs such as Medicare and Medicaid were introduced in the 1960s, the government directly reimbursed medical providers for the care that they provided, through a classic “single payer system.” Since the mid-1980s, however, there has been an evolution towards a model where the government subsidizes enrollees who choose among privately provided insurance options. In the United States, privatized delivery of public health insurance appears to be here to stay, with debates now focused on how much to expand its reach. Yet such privatized delivery raises a variety of thorny issues. Will choice among private insurance options lead to adverse selection and market failures in privatized insurance markets? Can individuals choose appropriately over a wide range of expensive and confusing plan options? Will a privatized approach deliver the promised increases in delivery efficiency claimed by advocates? What policy mechanisms have been used, or might be used, to address these issues? A growing literature in health economics has begun to make headway on these questions. In this essay, I discuss that literature and the lessons for both economics more generally and health care policymakers more specifically.
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Affiliation(s)
- Jonathan Gruber
- Massachusetts Institute of Technology, Cambridge, Massachusetts
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