Keith Marzilli Ericson

Professor of Markets, Public Policy, and Law at Questrom School of Business, Boston University

Research-Feature

Measuring Consumer Valuation of Limited Provider Networks

Measuring Consumer Valuation of Limited Provider Networks

Published: American Economic Review, Papers and Proceedings, 2015.

Longer version: NBER Working Paper 20812. (Joint with Amanda Starc)

WTP for Network Breadth

We measure provider coverage networks for plans on the Massachusetts health insurance exchange using a two measures: consumer surplus from a hospital demand system and the fraction of population hospital admissions that would be covered by the network. The two measures are highly correlated, and show a wide range of networks available to consumers. We then estimate consumer willingness-to-pay for network breadth, which varies by age. 60-year-olds value the broadest network approximately $1200-1400/year more than the narrowest network, while 30-year-olds value it about half as much. Consumers place additional value on star hospitals, and there is significant geographic heterogeneity in the value of network breadth.

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