Equilibria in Health Exchanges: Adverse Selection versus Reclassification Risk

Handel, Benjamin; Hendel, Igal; Whinston, Michael D.

doi:10.3982/ecta12480

Cited by 171 publications

(145 citation statements)

References 48 publications

(61 reference statements)

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“…On the supply side, if insurers can offer quantity-price pairs, as in Rothschild and Stiglitz (1976), the only equilibrium outcome, when it exists, requires full separation of types, and so no further cross-subsidization is feasible. A possible way forward is to follow Handel, Hendel, and Whinston (2015) and focus on a market configuration with two active policies, using Riley equilibrium as the solution concept. Relaxing competition would introduce an additional dimension to the problem of the regulator, since different information structures induce different splits of the pie for buyers and sellers.…”

Section: Discussionmentioning

confidence: 99%

“…In a recent paper, Handel, Hendel, and Whinston (2015) estimate the social welfare in health insurance exchanges under two pricing systems. Under a system of pure community rating, insurers are not allowed to price any individual risk characteristics, which constitutes the no information benchmark of our model.…”

Section: Welfare and Comparative Staticsmentioning

confidence: 99%

“…The papers most related to our work are Handel, Hendel, and Whinston (2015) and Goldstein and Leitner (2015). Handel, Hendel, and Whinston (2015) quantitatively study the effect of price discrimination by simulating health insurance exchanges (markets).…”

Section: Related Literaturementioning

confidence: 99%

“…Handel, Hendel, and Whinston (2015) quantitatively study the effect of price discrimination by simulating health insurance exchanges (markets). They focus on two pricing schemes, no discrimination and perfect discrimination, which in our model correspond to a rating system that reveals no information and complete information, respectively.…”

Section: Related Literaturementioning

confidence: 99%

“…In order to calibrate these parameters, we again follow Handel, Hendel, and Whinston (2015) and assume that a is log-normal with mean 6 (in thousands of US $) and V ar( a ) = 60 and γ = 0.05. We approximate the log-normal distribution of types so that i ∈ {2, 6.85, 23} with probabilities (0.5, 0.4, 0.1).…”

Section: Welfare and Comparative Staticsmentioning

confidence: 99%

See 4 more Smart Citations

Information Design in Insurance Markets: Selling Peaches in a Market for Lemons

2018

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. This paper characterizes the optimal information structure in competitive insurance markets with adverse selection. A regulator assigns ratings to individuals according to their risk characteristics, insurers offer fixed insurance contracts to each rating group, and the market clears as in Akerlof (1970). The optimal rating system minimizes ex-ante risk subject to participation constraints. We prove that in any such market there exists a unique optimal system under which all individuals trade and the ratings match low risk types with high risk types negative assortatively. A simple algorithm yields the optimal system. We examine implications for government regulations of insurance markets. JEL-Codes: D820. Terms of use: Documents in

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Section: Discussionmentioning

confidence: 99%

Section: Welfare and Comparative Staticsmentioning

confidence: 99%

Section: Related Literaturementioning

confidence: 99%

Section: Related Literaturementioning

confidence: 99%

Section: Welfare and Comparative Staticsmentioning

confidence: 99%

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Information Design in Insurance Markets: Selling Peaches in a Market for Lemons

2018

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Alternative Payment Models and Performance in Federally Qualified Health Centers

Markowski,

Wallace,

Schlesinger

et al. 2024

JAMA Intern Med

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ImportanceSeveral state Medicaid agencies have transitioned from traditional fee-for-service to a value-centric alternative payment model (APM) to reimburse federally qualified health centers (FQHCs). Little is known about the effects of this shift on FQHC performance.ObjectiveTo assess the association between APMs and the clinical performance, payer mix, risk profile, and financial sustainability of FQHCs.Design, Setting, and ParticipantsThis retrospective cohort study was performed in 684 FQHCs (representing 37 states plus the District of Columbia) that continuously operated between January 2009 and December 2021. Data on payer mix (eg, type of insurance) and risk profile (eg, proportion of patients with chronic conditions) of FQHC patients were obtained from the Uniform Data System, and clinic-level financial data (eg, revenue) were obtained from Internal Revenue Service form 990 tax documents. Data were analyzed between November 2022 and October 2023.ExposureInitial rollout of a value-based payment model (ie, an APM) for FQHCs, as offered by state Medicaid program, between January 2013 and December 2021.Main Outcomes and MeasuresThe main outcomes were 4 audited process measures of health care quality (cervical and colorectal cancer screening and body mass index [BMI] assessment for adults and children) and 2 intermediate health outcome measures (hypertension control and diabetes control). A difference-in-differences design was used with staggered implementation comparing FQHCs before and after the initial APM rollout vs contemporaneous changes in FQHCs in states without APMs.ResultsA total of 684 FQHCs (8892 FQHC-years) that served 17 823 959 patients in 2021 (57.3% female) were included in the study. Among FQHCs in states implementing APMs, significant differential increases in 3 of the 4 process quality measures were observed compared with FQHCs in states that did not implement an APM: colorectal cancer screening (3.24 percentage points [pp]; 95% CI, 1.40-5.08 pp), adult BMI (3.19 pp; 95% CI, 0.70-5.68 pp), and child BMI (4.50 pp; 95% CI, 1.83-7.17 pp). There were also modest differential improvements in blood pressure control for individuals with hypertension (1.02 pp; 95% CI, 0.04-2.00 pp) and blood glucose control for individuals with type 2 diabetes (1.02 pp; 95% CI, 0.02-2.02 pp) compared with FQHCs in states without an APM. There was no evidence that the APM rollout was associated with clinics selecting healthier patients (–0.01 pp; 95% CI, –0.21 to 0.19 pp) or stinting on care (–0.02 visits; 95% CI, –0.08 to 0.04 visits).Conclusions and RelevanceIn this cohort study, introduction of Medicaid APM options for FQHCs was associated with modest, statistically significant increases in quality concentrated among FQHCs with APM models that explicitly incentivized quality. This finding suggests that APMs can be both a financially viable and a health-promoting model for reimbursement in the health care safety net.

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The impact of a national formulary expansion on diabetics

McNamara

Serna

2022

Health Economics

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Prescription drug formularies are an element of health insurance plan design that determine coverage and coinsurance rates for medications. Formularies are an important mechanism for healthcare cost containment that can increase the bargaining power of insurance companies in their negotiations with pharmaceutical manufacturers over the price of prescription drugs. The complexity of insurance plan design in settings such as the U.S. healthcare market and insurers' discretion over the elements of that design make it difficult to assess how changes in prescription drug coverage impact consumers. Evaluating changes in formulary design when such changes are endogenous choices of the insurer usually requires a structural approach as well as information on all other plan characteristics. While expanded coverage might increase prescription drug costs, spillovers from drug to non-drug spending raise the possibility that adding drugs to a formulary might decrease healthcare costs overall. For instance, Tamblyn et al. (2001) show that the rate of adverse health outcomes and emergency room visits increase among poor and elderly individuals following an increase in cost sharing for essential prescription drugs. Understanding how formulary design impacts healthcare costs and utilization is of great concern to countries like Canada, Mexico, Japan, Colombia, and the U.S. where prescription drug spending comprises more than 10% of total healthcare costs (OECD, 2020). Also of keen interest is how insurers' ability to respond to exogenous changes in formulary design impacts enrollees.

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Equilibria in Health Exchanges: Adverse Selection versus Reclassification Risk

Cited by 171 publications

References 48 publications

Information Design in Insurance Markets: Selling Peaches in a Market for Lemons

Information Design in Insurance Markets: Selling Peaches in a Market for Lemons

Alternative Payment Models and Performance in Federally Qualified Health Centers

The impact of a national formulary expansion on diabetics

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