Working Paper: NBER ID: w29406
Authors: Michael J. Dickstein; Kate Ho; Nathaniel D. Mark
Abstract: In the United States, households obtain health insurance through distinct market segments. To explore the economics of this segmentation, we consider the effects of pooling coverage provided through small employers and through the individual marketplace. We model households’ demand for insurance coverage and health care, along with insurers’ price-setting, to predict equilibrium choices, premiums, and health spending. Applying our model to data from Oregon, we find that pooling can both mitigate adverse selection in the individual market and benefit small group households without raising taxpayer costs: premiums in the individual market fall 11% for the most chosen plan type and consumers in both segments gain surplus. Our estimates provide insight into the effects of new regulations that allow employers to shift coverage to the individual market.
Keywords: No keywords provided
JEL Codes: I11; I13; I18; L0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Pooling coverage from small group and individual markets (G52) | Mitigates adverse selection in the individual market (G52) |
| Pooling coverage from small group and individual markets (G52) | Decrease in premiums (G52) |
| Healthier households from the small group market entering the individual market (G52) | Improves risk profile of the individual market (G52) |
| Pooling coverage from small group and individual markets (G52) | Positive impact on consumer surplus (F61) |
| Small group enrollees spending less on covered health services (H51) | Higher insurer markups in the small group market (G52) |
| Pooling coverage from small group and individual markets (G52) | Overall welfare change (D69) |