Hospital Network Competition and Adverse Selection: Evidence from the Massachusetts Health Insurance Exchange

Shepard, Mark

doi:10.3386/w22600

Cited by 80 publications

(77 citation statements)

References 27 publications

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“…Pinkovskiy (2014) estimates that these laws essentially eroded all of the gains from managed care in the mid-1990s. There are related concerns that expanded use of limited network plans could increase selection in insurance markets, with insurers excluding the most expensive providers to avoid the sickest patients; Shepard (2015) argues that this was the case for growth of some limited network plans in Massachusetts.…”

Section: Discussionmentioning

confidence: 99%

Controlling Health Care Costs through Limited Network Insurance Plans: Evidence from Massachusetts State Employees

Gruber

McKnight

2016

American Economic Journal: Economic Policy

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We investigate the impact of limited network insurance plans in the context of the Massachusetts Group Insurance Commission (GIC),A s employers and governments look to control runaway health care costs, one place they are turning is to limited network plans. Recognizing that the cost of comparable services can vary widely across providers, insurers are offering plans that exclude the highest cost providers and thereby significantly reduce insurance premiums. These plans often do not vary in their enrollee cost sharing or other plan characteristics, relying only on the restriction to lower cost providers to ensure savings. As a result, they have proven to be increasingly popular, and they appear to be a mainstay of the plan offerings on state and federal exchanges under the Affordable Care Act (ACA). In particular, the explicit tying of ACA insurance subsidies for low income families to the (second) lowest cost plan in the area is likely to induce enormous movement into limited network plans, which are often the least expensive.But these limited network plans are not without their detractors. Many are concerned that individuals will suffer a disruption in care if they switch to a limited * Gruber: Department of Economics, Massachusetts Institute of Technology (MIT), 50 Memorial Drive, Building E52, Room 355, Cambridge, MA 02142 and the National Bureau for Economic Research (NBER) (e-mail: gruberj@mit.edu); McKnight: Department of Economics, Wellesley College, 106 Central Street, Wellesley, MA 02481 and the NBER (e-mail: robin.mcknight@wellesley.edu). We are extremely grateful to Dolores Mitchell, Ennio Manto, Catherine Moore, and Diane McKenzie at the Group Insurance Commission (GIC) for their enormous assistance in providing the data for this project and to the referees, as well as seminar participants at the Federal Reserve

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Section: Discussionmentioning

confidence: 99%

Controlling Health Care Costs through Limited Network Insurance Plans: Evidence from Massachusetts State Employees

Gruber

McKnight

2016

American Economic Journal: Economic Policy

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“…8 However, we have little understanding of the quality of care provided in MA plan networks and plans’ selection of hospitals and physician providers. A Massachusetts study found that plans with narrow networks excluded hospitals with higher star ratings more frequently than did plans with broader networks 4 and often excluded other prestigious but expensive research institutions. 9 Qualitatively, both insurance companies and hospital executives have described controlling costs by limiting access to certain facilities as a key strategy, particularly with the introduction of the Affordable Care Act.…”

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confidence: 99%

Medicare Advantage Enrollees More Likely To Enter Lower-Quality Nursing Homes Compared To Fee-For-Service Enrollees

Meyers

Mor²,

Rahman³

2018

Health Affairs

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Unlike fee-for-service (FFS) Medicare, most Medicare Advantage (MA) plans have a preferred network of care providers that serve most of a plan’s enrollees. Little is known about how the quality of care MA enrollees receive differs from that of FFS Medicare enrollees. This article evaluates the differences in the quality of skilled nursing facilities (SNFs) that Medicare Advantage and FFS beneficiaries entered in the period 2012–14. After we controlled for patients’ clinical, demographic, and residential neighborhood effects, we found that FFS Medicare patients have substantially higher probabilities of entering higher-quality SNFs (those rated four or five stars by Nursing Home Compare) and those with lower readmission rates, compared to MA enrollees. The difference between MA and FFS Medicare SNF selections was less for enrollees in higher-quality MA plans than those in lower-quality plans, but Medicare Advantage still guided patients to lower-quality facilities.

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“…In contrast to most of this literature, which has focused on average behavioral responses, our focus here is on the potential individual heterogeneity in the behavioral response and its implications (in this case, for risk scoring). In this sense, our paper relates to previous work analyzing the role of heterogeneity in the behavioral response in contributing to adverse selection in an employer-provided health insurance setting (Einav et al 2013a; Shepard 2015). …”

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confidence: 86%

Beyond Statistics: The Economic Content of Risk Scores

Einav

Finkelstein²,

Kluender³

et al. 2016

American Economic Journal: Applied Economics

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“Big data” and statistical techniques to score potential transactions have transformed insurance and credit markets. In this paper, we observe that these widely-used statistical scores summarize a much richer heterogeneity, and may be endogenous to the context in which they get applied. We demonstrate this point empirically using data from Medicare Part D, showing that risk scores confound underlying health and endogenous spending response to insurance. We then illustrate theoretically that when individuals have heterogeneous behavioral responses to contracts, strategic incentives for cream skimming can still exist, even in the presence of “perfect” risk scoring under a given contract.

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Hospital Network Competition and Adverse Selection: Evidence from the Massachusetts Health Insurance Exchange

Abstract: NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Cited by 80 publications

References 27 publications

Controlling Health Care Costs through Limited Network Insurance Plans: Evidence from Massachusetts State Employees

Controlling Health Care Costs through Limited Network Insurance Plans: Evidence from Massachusetts State Employees

Medicare Advantage Enrollees More Likely To Enter Lower-Quality Nursing Homes Compared To Fee-For-Service Enrollees

Beyond Statistics: The Economic Content of Risk Scores

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