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Pricing Regulation and Imperfect Competition on the Massachusetts Health Insurance Exchange

Keith M. Marzilli Ericson1,2; Amanda Starc3

1 Boston University · 2 National Bureau of Economic Research · 3 California University of Pennsylvania

The Review of Economics and Statistics 2015

We analyze insurance-pricing regulation under imperfect competition on the Massachusetts health insurance exchange. Differential markups lead to price variation apart from cost variation. Coarse insurer pricing strategies identify consumer demand. Younger consumers are twice as price sensitive as older consumers. Older consumers thus face higher markups over costs. Modified community rating links prices for consumers differing in both costs and preferences, and changes the marginal consumer firms face. Stricter regulations transfer resources from low-cost to high-cost consumers, reduce firm profits, and increase overall consumer surplus.

DOI
10.1162/rest_a_00514
Volume
97 (3)
Pages
667-682
Language
en
Export
BibTeX
Sources
openalex crossref