Notes on "More Insurers Lower Premiums: Evidence from Initial Pricing in the Health Insurance Marketplaces" (Leemore Dafney, Christopher Ody and Jonathan Gruber)

More Insurers Lower Premiums: Evidence from Initial Pricing in the Health Insurance Marketplaces

Leemore Dafney

Kellogg School of Management, Northwester University and NBER

Jonathan Gruber

Massachusetts Institute of Technology and NBER 

Christopher Ody

Kellogg School of Management, Northwester University

July, 2014

Federal health insurance subsidies are only available to those who purchase a policy through Health Insurance Marketplaces (HIMs), only known as exchanges.

The success of HIMs will depend on attracting both consumers and insurers.

Competition can only have its salutary effects if there are competitors.

Prior to the ACA, health insurance markets were very concentrated.

This study builds on existing research on competition among private insurers.

Instrument is similar in spirit to that used by Dafry et al (2012).

(Econometrics)

Exchange premiums are responsive to competition

HIMs have not (to date) produced a Bertsand-like outcome in which a small number of players can drive premiums chum to cost.

Future entry:

there is room for significant learning on both scales of this market:

Changes in the sharper of consumes demand curves will in turn affect pricing. Relatedly, insures' uncertainty about who their competitors will be, what the pool of consumers will look like, and what kinds of products will be attractive to those consumers will resolve. What impossible to sign definitely, most of there are likely to make the cross-price elasticities of demand across insurers higher for a given market structure. Under these circumstances, margins will decline faster with a more from one to two insurers. Once pricing nears the competitors will have a smaller incremental effect.