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Insurers’ response to selection risk: Evidence from Medicare enrollment reforms

Author

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  • Decarolis, Francesco
  • Guglielmo, Andrea

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.

Suggested Citation

  • Decarolis, Francesco & Guglielmo, Andrea, 2017. "Insurers’ response to selection risk: Evidence from Medicare enrollment reforms," Journal of Health Economics, Elsevier, vol. 56(C), pages 383-396.
    • Handle: RePEc:eee:jhecon:v:56:y:2017:i:c:p:383-396
    DOI: 10.1016/j.jhealeco.2017.02.007
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    Cited by:

    1. repec:spo:wpmain:info:hdl:2441/4bg68glinb8r8roh0akvprtu9u is not listed on IDEAS
    2. Michele Fioretti & Hongming Wang, 2023. "Performance Pay in Insurance Markets: Evidence from Medicare," The Review of Economics and Statistics, MIT Press, vol. 105(5), pages 1128-1144, September.
    3. Peter Paul Klein & Richard van Kleef & Josefa Henriquez & Francesco Paolucci, 2023. "The interplay between risk adjustment and risk rating in voluntary health insurance," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 90(1), pages 59-91, March.
    4. Michele Fioretti & Hongming Wang, 2019. "Subsidizing Inequality: Performance Pay and Risk Selection in Medicare," Working Papers hal-03393070, HAL.
    5. A. A. Withagen-Koster & R. C. Kleef & F. Eijkenaar, 2020. "Incorporating self-reported health measures in risk equalization through constrained regression," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 21(4), pages 513-528, June.
    6. Richard C. van Kleef & René C. J. A. van Vliet, 2022. "How to deal with persistently low/high spenders in health plan payment systems?," Health Economics, John Wiley & Sons, Ltd., vol. 31(5), pages 784-805, May.
    7. Francesco Decarolis & Andrea Guglielmo & Clavin Luscombe, 2020. "Open enrollment periods and plan choices," Health Economics, John Wiley & Sons, Ltd., vol. 29(7), pages 733-747, July.
    8. Keaton S. Miller & Amil Petrin & Robert Town & Michael Chernew, 2019. "Optimal Managed Competition Subsidies," NBER Working Papers 25616, National Bureau of Economic Research, Inc.
    9. repec:spo:wpmain:info:hdl:2441/2ioennpq5m90holakkatq7cmms is not listed on IDEAS
    10. Olivier Darmouni & Dan Zeltzer, 2022. "Horizon effects and adverse selection in health insurance markets," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 55(2), pages 800-827, May.
    11. repec:spo:wpecon:info:hdl:2441/2ioennpq5m90holakkatq7cmms is not listed on IDEAS
    12. Jason Abaluck & Mauricio Caceres Bravo & Peter Hull: & Amanda Starc, 2021. "Mortality Effects and Choice Across Private Health Insurance Plans," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 136(3), pages 1557-1610.
    13. repec:spo:wpecon:info:hdl:2441/4bg68glinb8r8roh0akvprtu9u is not listed on IDEAS
    14. Hill, Nicholas & Wagner, Mathis, 2021. "Heterogeneous effects of consolidation on premiums in Medicare Part D," Journal of Health Economics, Elsevier, vol. 80(C).

    More about this item

    Keywords

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    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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