Affiliation:
1. Kennedy School of Government, Harvard University, and NBER (email: )
Abstract
Health insurers increasingly compete on their networks of medical providers. Using data from Massachusetts’s insurance exchange, I find substantial adverse selection against plans covering the most prestigious and expensive “star” hospitals. I highlight a theoretically distinct selection channel: consumers loyal to star hospitals incur high spending, conditional on their medical state, because they use these hospitals’ expensive care. This implies heterogeneity in consumers’ incremental costs of gaining access to star hospitals, posing a challenge for standard selection policies. Along with selection on unobserved sickness, I find this creates strong incentives to exclude star hospitals, even with risk adjustment in place. (JEL D82, G22, H75, I11, I13, I18)
Publisher
American Economic Association
Subject
Economics and Econometrics
Cited by
15 articles.
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