Keith Marzilli Ericson

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


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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