Pricing Regulation and Imperfect Competition on the Massachusetts Health Insurance Exchange

4:00 pm on Thursday, October 18, 2012
5:30 pm on Thursday, October 18, 2012
The Boston University Health Policy Institute is pleased to announce the second seminar in its 2012 – 2013 Health Policy and Management Seminar Series. Professor Keith Ericson will present “Pricing Regulation and Imperfect Competition on the Massachusetts Health Insurance Exchange” on Thursday, October 18, 2012, 4:00 – 5:30 pm, in SMG Room 306. Abstract We analyze consumer choice and pricing regulation on the Masaschusetts health insurance exchange. Coarse insurer pricing strategies identify price sensitivity, showing substantial age-based heterogeneity: the young are more than twice as price sensitive as the old. Differences in prices by age reflect price discrimination motives as well as cost motives. Restrictions on age-based pricing lead to transfers between consumers, but also increase consumer surplus. Minimum loss ratios can limit markups on older consumers and mitigate transfers from community rating. Even with perfect risk adjustment, regulations limiting the extent prices can vary by age would bind. Tightening these pricing regulation can lead to the market unraveling without a mandate. Keith Marzilli Ericson is an economist in the Markets, Public Policy, and Law department in the Boston University School of Management. His research focuses on health insurance markets and behavioral economics. His projects have studied the Massachusetts health insurance exchange and the Medicare Part D market. His work has appeared in the American Economic Review, Quarterly Journal of Economics, Journal of the European Economic Association, and Journal of Neuroscience.