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Pricing Regulation and Imperfect Competition on the Massachusetts Health Insurance Exchange

Author

Listed:
  • Keith M. Marzilli Ericson

    (Boston University and NBER)

  • Amanda Starc

    (University of Pennsylvania)

Abstract

We analyze insurance-pricing regulation under imperfect competition on the Massachusetts health insurance exchange. Differential markups lead to price variation apart from cost variation. Coarse insurer pricing strategies identify consumer demand. Younger consumers are twice as price sensitive as older consumers. Older consumers thus face higher markups over costs. Modified community rating links prices for consumers differing in both costs and preferences, and changes the marginal consumer firms face. Stricter regulations transfer resources from low-cost to high-cost consumers, reduce firm profits, and increase overall consumer surplus.

Suggested Citation

  • Keith M. Marzilli Ericson & Amanda Starc, 2015. "Pricing Regulation and Imperfect Competition on the Massachusetts Health Insurance Exchange," The Review of Economics and Statistics, MIT Press, vol. 97(3), pages 667-682, July.
  • Handle: RePEc:tpr:restat:v:97:y:2015:i:2:p:667-682
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    More about this item

    Keywords

    price regulation; imperfect competition; massachusetts; massachusetts health insurance exchange; insurance; insurance-pricing; age differences; consumers; price markups;
    All these keywords.

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private

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