Insurers’ response to selection risk: Evidence from Medicare enrollment reforms |
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Institution: | 1. Department of Economics, Università Bocconi, Italy;2. Analysis Group, United States;1. Institute for Evaluation of Labour Market and Education Policy (IFAU) and Uppsala Center for Labor Studies (UCLS), Sweden;2. Institute for Evaluation of Labour Market and Education Policy (IFAU), Sweden and Department of Economics, Uppsala University, Sweden;1. RAND Corporation, United States;2. School of Public Health, University of California, Berkeley, United States;1. Duesseldorf Institute for Competition Economics (DICE), Heinrich Heine University, Germany;2. TILEC and Department of Economics, Tilburg University, The Netherlands;1. Department of Economics, University of California, Santa Barbara, United States;2. Department of Economics, Andrew Young School of Policy Studies, Georgia State University, United States;1. Department of Health Care Policy, Harvard Medical School, 180 Longwood Avenue, Boston, MA 02115, United States;2. Department of Health Policy and Management, Harvard School of Public Health, 677 Huntington Avenue, Rm 433, Boston, MA 02115, United States;3. National Bureau of Economic Research, 1050 Massachusetts Avenue, Cambridge, MA 02138, United States |
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Abstract: | Evidence on insurers’ behavior in environments with both risk selection and market power is largely missing. We fill this gap by providing one of the first empirical accounts of how insurers adjust plan features when faced with potential changes in selection. Our strategy exploits a 2012 reform allowing Medicare enrollees to switch to 5-star contracts at anytime. This policy increased enrollment into 5-star contracts, but without risk selection worsening. Our findings show that this is due to 5-star plans lowering both premiums and generosity, thus becoming more appealing for most beneficiaries, but less so for those in worse health conditions. |
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Keywords: | Health insurance Risk selection Vendor rating Medicare |
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