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

Francesco Decarolis and Andrea Guglielmo

Journal of Health Economics, 2017, vol. 56, issue C, 383-396

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.

Keywords: Health insurance; Risk selection; Vendor rating; Medicare (search for similar items in EconPapers)
JEL-codes: I11 I18 L22 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (22)

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Working Paper: Insurers' Response to Selection Risk: Evidence from Medicare Enrollment Reforms (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jhecon:v:56:y:2017:i:c:p:383-396

DOI: 10.1016/j.jhealeco.2017.02.007

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