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

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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. Michele Fioretti & Hongming Wang, 2019. "Subsidizing Inequality: Performance Pay and Risk Selection in Medicare," Sciences Po Economics Discussion Papers 2019-15, Sciences Po Departement of Economics.
    2. Michele Fioretti & Hongming Wang, 2020. "Performance Pay in Insurance Markets: Evidence from Medicare," Working Papers 2020.03, International Network for Economic Research - INFER.
    3. 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.
    4. 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.
    5. Keaton S. Miller & Amil Petrin & Robert Town & Michael Chernew, 2019. "Optimal Managed Competition Subsidies," NBER Working Papers 25616, National Bureau of Economic Research, Inc.
    6. Jason Abaluck & Mauricio Caceres Bravo & Peter Hull & Amanda Starc, 2020. "Mortality Effects and Choice Across Private Health Insurance Plans," Working Papers 2020-108, Becker Friedman Institute for Research In Economics.
    7. Jason Abaluck & Mauricio M. Caceres Bravo & Peter Hull & Amanda Starc, 2020. "Mortality Effects and Choice Across Private Health Insurance Plans," NBER Working Papers 27578, National Bureau of Economic Research, Inc.

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    More about this item

    Keywords

    Health insurance; Risk selection; Vendor rating; Medicare;
    All these keywords.

    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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