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How product standardization affects choice: Evidence from the Massachusetts Health Insurance Exchange

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  • Ericson, Keith M. Marzilli
  • Starc, Amanda

Abstract

This paper examines the effect of choice architecture on Massachusetts' Health Insurance Exchange. A policy change standardized cost-sharing parameters of plans across insurers and altered information presentation. Post-change, consumers chose more generous plans and different brands, but were not more price-sensitive. We use a discrete choice model that allows the policy to affect how attributes are valued to decompose the policy's effects into a valuation effect and a product availability effect. The brand shifts are largely explained by the availability effect and the generosity shift by the valuation effect. A hypothetical choice experiment replicates our results and explores alternative counterfactuals.

Suggested Citation

  • Ericson, Keith M. Marzilli & Starc, Amanda, 2016. "How product standardization affects choice: Evidence from the Massachusetts Health Insurance Exchange," Journal of Health Economics, Elsevier, vol. 50(C), pages 71-85.
  • Handle: RePEc:eee:jhecon:v:50:y:2016:i:c:p:71-85
    DOI: 10.1016/j.jhealeco.2016.09.005
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    Cited by:

    1. Lunn, Pete & Bohacek, Marek & Somerville, Jason & Ni Choisdealbha, Aine & McGowan, Feidhlim, 2016. "PRICE Lab: An Investigation of Consumers’ Capabilities with Complex Products," Research Series, Economic and Social Research Institute (ESRI), number BKMNEXT306.
    2. repec:aea:jecper:v:31:y:2017:i:4:p:3-22 is not listed on IDEAS
    3. Leemore Dafny & Jonathan Gruber & Christopher Ody, 2015. "More Insurers Lower Premiums: Evidence from Initial Pricing in the Health Insurance Marketplaces," American Journal of Health Economics, MIT Press, vol. 1(1), pages 53-81, Winter.
    4. Sonia P. Jaffe & Mark Shepard, 2017. "Price-Linked Subsidies and Imperfect Competition in Health Insurance," NBER Working Papers 23104, National Bureau of Economic Research, Inc.
    5. Kircher, Philipp & Marzilli Ericson, Keith & Spinnewijn, Johannes & Starc, Amanda, 2015. "Inferring Risk Perceptions and Preferences using Choice from Insurance Menus: Theory and Evidence," CEPR Discussion Papers 10981, C.E.P.R. Discussion Papers.
    6. Jaffe, Sonia & Shepard, Mark, 2017. "Price-Linked Subsidies and Health Insurance Markups," Working Paper Series rwp17-002, Harvard University, John F. Kennedy School of Government.
    7. repec:eee:ecolet:v:159:y:2017:i:c:p:69-73 is not listed on IDEAS
    8. Crosetto, P. & Gaudeul, A., 2014. "Choosing whether to compete: Price and format competition with consumer confusion," Working Papers 2014-08, Grenoble Applied Economics Laboratory (GAEL).
    9. Michael P. Keane & Susan Thorp, 2016. "Complex Decision Making: The Roles of Cognitive Limitations, Cognitive Decline and Ageing," Economics Papers 2016-W10, Economics Group, Nuffield College, University of Oxford.
    10. Keith Marzilli Ericson & Amanda Starc, 2015. "Measuring Consumer Valuation of Limited Provider Networks," American Economic Review, American Economic Association, vol. 105(5), pages 115-119, May.
    11. Mark Shepard, 2016. "Hospital Network Competition and Adverse Selection: Evidence from the Massachusetts Health Insurance Exchange," NBER Working Papers 22600, National Bureau of Economic Research, Inc.
    12. Job Harms & S. Rosenkranz & M.W.J.L. Sanders, 2017. "Choice Complexity, Benchmarks and Costly Information," Working Papers 17-07, Utrecht School of Economics.
    13. Leemore Dafny & Jonathan Gruber & Christopher Ody, 2014. "More Insurers Lower Premiums: Evidence from Initial Pricing in the Health Insurance Marketplaces," NBER Working Papers 20140, National Bureau of Economic Research, Inc.
    14. repec:aea:jecper:v:31:y:2017:i:4:p:51-72 is not listed on IDEAS
    15. repec:eee:hapoch:v1_661 is not listed on IDEAS

    More about this item

    Keywords

    Health insurance; Standardization; Framing; Consumer choice;

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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