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Screening in Contract Design: Evidence from the ACA Health Insurance Exchanges / Michael Geruso, Timothy J. Layton, Daniel Prinz.
- Format:
- Book
- Author/Creator:
- Geruso, Michael.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w22832.
- NBER working paper series no. w22832
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Other Title:
- Screening in Contract Design
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2016.
- Summary:
- 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:
- Print version record
- November 2016.
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