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More Insurers Lower Premiums: Evidence from Initial Pricing in the Health Insurance Marketplaces

Author

Listed:
  • Leemore Dafny
  • Jonathan Gruber
  • Christopher Ody

Abstract

First-year insurer participation in the Health Insurance Marketplaces (HIMs) established by the Affordable Care Act is limited in many areas of the country. There are 3.9 participants, on (population-weighted) average, in the 395 ratings areas spanning the 34 states with federally facilitated marketplaces (FFMs). Using data on the plans offered in the FFMs, together with predicted market shares for HIM participants (estimated using 2011 insurer-state market shares in the individual insurance market), we study the impact of competition on premiums. We exploit variation in ratings-area-level competition induced by UnitedHealthcare's decision not to participate in any of the FFMs. We estimate that the second-lowest-price silver premium (which is directly linked to federal subsidies) would have decreased by 5.4 percent, on average, had UnitedHealthcare participated. If all insurers active in each state's individual insurance market in 2011 had participated in all ratings areas in that state's HIM, we estimate this key premium would be 11.1% lower and 2014 federal subsidies would be reduced by $1.7 billion.

Suggested Citation

  • 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.
  • Handle: RePEc:nbr:nberwo:20140
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    File URL: http://www.nber.org/papers/w20140.pdf
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    References listed on IDEAS

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    1. Keith Marzilli Ericson & Amanda Starc, 2012. "Heuristics and Heterogeneity in Health Insurance Exchanges: Evidence from the Massachusetts Connector," American Economic Review, American Economic Association, vol. 102(3), pages 493-497, May.
    2. Claudio Lucarelli & Jeffrey Prince & Kosali Simon, 2012. "The Welfare Impact Of Reducing Choice In Medicare Part D: A Comparison Of Two Regulation Strategies," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(4), pages 1155-1177, November.
    3. Heiss, Florian & Leive, Adam & McFadden, Daniel & Winter, Joachim, 2013. "Plan selection in Medicare Part D: Evidence from administrative data," Journal of Health Economics, Elsevier, vol. 32(6), pages 1325-1344.
    4. 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.
    5. 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.
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    1. repec:taf:applec:v:49:y:2017:i:30:p:3005-3015 is not listed on IDEAS
    2. 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.
    3. Andrew Stocking & James Baumgardner & Melinda Buntin & Anna Cook, 2014. "Examining the Number of Competitors and the Cost of Medicare Part D: Working Paper 2014-04," Working Papers 45553, Congressional Budget Office.
    4. Amanda Kowalski, 2014. "The Early Impact of the Affordable Care Act, State by State," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 45(2 (Fall)), pages 277-355.
    5. 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.

    More about this item

    JEL classification:

    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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