Measuring Consumer Valuation of Limited Provider Networks

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.

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.

Pricing Regulation and Imperfect Competition on the Massachusetts Health Insurance Exchange

Pricing Regulation and Imperfect Competition on the Massachusetts Health Insurance Exchange

Review of Economics and Statistics, 2015. (joint with Amanda Starc)Also see NBER Working Paper 18089.

Insurance markets often contain pricing regulation, such as community rating. I examine how pricing regulation interacts with imperfect competition.

When markets are imperfectly competitive,  these regulations link prices for consumers that differ not only in costs, but also in preferences.  Tightening community rating regulation doesn’t merely move the price toward the average cost, since firms price to the marginal enrollee. As a result, community rating regulation can affect firm profits and market efficiency. We look at the Massachusetts Health Insurance Exchange (HIX), and show that younger individuals are much more price sensitive than older individuals.  Thus, insurers should charge higher markups on older individuals. Tighter community rating restrictions transfer money from younger consumers to older consumers, but also from firm profits to consumer surplus.