Screening in Contract Design: Evidence from the ACA Health Insurance Exchanges

Citation:

Geruso, Mike, Tim Layton, and Daniel Prinz. 2019. “Screening in Contract Design: Evidence from the ACA Health Insurance Exchanges.” American Economic Journal: Economic Policy 11 (2): 64-107.
Paper975 KB
Online Appendix0 bytes
Slides1.65 MB
Data and Code38.6 MB

Date Published:

2016

Abstract:

We study insurers’ use of prescription drug formularies to screen consumers in the ACA Health Insurance Exchanges. We begin by showing that Exchange risk adjustment and reinsurance succeed in neutralizing selection incentives for most, but not all, consumer types. A minority of consumers, identifiable by demand for particular classes of prescription drugs, are predictably unprofitable. We then show that contract features relating to these drugs are distorted in a manner consistent with multi-dimensional screening. The empirical findings support a long theoretical literature examining how insurance contracts offered in equilibrium can fail to optimally trade-off risk protection and moral hazard.

Notes:

Awarded the 2017 Mark A. Satterthwaite Award for Outstanding Research in Healthcare Markets
NBER Working Paper 22832 
Executive Summary
Summary on the Incidental Economist

Publisher's Version

Last updated on 08/04/2020