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American Economic Review Vol. 105 No. 5 2015

Measuring Consumer Valuation of Limited Provider Networks

Keith M. Marzilli Ericson1; Amanda Starc2

1 Department of Markets, Public Policy, and Law, Boston University School of Management, 595 Commonwealth Avenue #615B, Boston, MA 02215, and NBER (e-mail: ) · 2 Department of Health Care Management, The Wharton School, University of Pennsylvania, 3641 Locust Walk #303, Philadelphia, PA, 19104, and NBER (e-mail: )

Abstract

We measure the breadth of insurance networks in the Massachusetts health insurance exchange. Using our measures, we estimate consumer willingness-to-pay for broad and narrow networks. We find that consumers have a wide range of plans available with dramatically different networks. While consumers value broader networks, their willingness-to-pay is smaller than the brand premium, indicating an additional role for brand preferences. Consumers place additional value on star hospitals, which may affect upstream negotiations. Finally, we find significant geographic heterogeneity in the value of broad networks.

DOI
10.1257/aer.p20151082
Volume
105
Issue
5
Pages
115-119
Language
en
Sources
bibtex:phds-export.bib crossref openalex

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