IDEAS home Printed from https://ideas.repec.org/a/aea/aecrev/v108y2018i3p828-67.html
   My bibliography  Save this article

Advertising and Risk Selection in Health Insurance Markets

Author

Listed:
  • Naoki Aizawa
  • You Suk Kim

Abstract

This paper studies the impact of advertising as a channel for risk selection in Medicare Advantage. We provide evidence that insurer advertising is responsive to the gains from risk selection. Then we develop and estimate an equilibrium model of Medicare Advantage with advertising, allowing rich individual heterogeneity. Our estimates show that advertising is effective in attracting healthy individuals who are newly eligible for Medicare, contributing to advantageous selection into Medicare Advantage. Moreover, risk selection through advertising substantially lowers premiums by improving insurers' risk pools. The distributional implication is that unhealthy consumers may be better off through cross-subsidization from healthy individuals.

Suggested Citation

  • Naoki Aizawa & You Suk Kim, 2018. "Advertising and Risk Selection in Health Insurance Markets," American Economic Review, American Economic Association, vol. 108(3), pages 828-867, March.
    • Handle: RePEc:aea:aecrev:v:108:y:2018:i:3:p:828-67
    Note: DOI: 10.1257/aer.20151485
    as

    Download full text from publisher

    File URL: https://www.aeaweb.org/doi/10.1257/aer.20151485
    Download Restriction: no
    File URL: https://www.aeaweb.org/articles/attachments?retrieve=rYfTJ-6n2-QJHwqI-WKYiIjGtGBebBQF
    Download Restriction: no
    File URL: https://www.aeaweb.org/articles/attachments?retrieve=k02K-MncAVTmzzUx__vWQTOTG6WHjJU8
    Download Restriction: no
    File URL: https://www.aeaweb.org/articles/attachments?retrieve=HivnouIXYhnryMw1VGIZzheZR7rvdGOq
    Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Fujii Yoichiro & Ogaku Michiko & Okura Mahito & Osaki Yusuke, 2020. "How do Optimistic Individuals Affect Insurance Advertisements?," Asia-Pacific Journal of Risk and Insurance, De Gruyter, vol. 14(2), pages 1-18, July.
    2. Naoki Aizawa & You Suk Kim, 2020. "Public and Private Provision of Information in Market-Based Public Programs: Evidence from Advertising in Health Insurance Marketplaces," NBER Working Papers 27695, National Bureau of Economic Research, Inc.
    3. Bradley T. Shapiro, 2020. "Advertising in Health Insurance Markets," Marketing Science, INFORMS, vol. 39(3), pages 587-611, May.
    4. Keaton S. Miller & Amil Petrin & Robert Town & Michael Chernew, 2019. "Optimal Managed Competition Subsidies," NBER Working Papers 25616, National Bureau of Economic Research, Inc.
    5. Tongil “TI” Kim & Diwas KC, 2020. "The Impact of Hospital Advertising on Patient Demand and Health Outcomes," Marketing Science, INFORMS, vol. 39(3), pages 612-635, May.
    6. Moiz Bhai & Danny Hughes, 2024. "Estimating Self-Selection in Medicare Advantage," Working Papers 2024-009, Human Capital and Economic Opportunity Working Group.
    7. Daniel Montanera & Abhay Nath Mishra & T. S. Raghu, 2022. "Mitigating Risk Selection in Healthcare Entitlement Programs: A Beneficiary-Level Competitive Bidding Approach," Information Systems Research, INFORMS, vol. 33(4), pages 1221-1247, December.
    8. Jiang, Yawen & Ni, Weiyi, 2020. "Impact of supplementary private health insurance on hospitalization and physical examination in China," China Economic Review, Elsevier, vol. 63(C).

    More about this item

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

    Lists

    This item is featured on the following reading lists, Wikipedia, or ReplicationWiki pages:
    1. Advertising and Risk Selection in Health Insurance Markets (AER 2018) in ReplicationWiki

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aea:aecrev:v:108:y:2018:i:3:p:828-67. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael P. Albert (email available below). General contact details of provider: https://edirc.repec.org/data/aeaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.