Measuring Ex Ante Welfare in Insurance Markets.
The willingness to pay for insurance captures the value of insurance against only the risk that remains when choices are observed. This article develops tools to measure the ex ante expected utility impact of insurance subsidies and mandates when choices are observed after some insurable information...
| Published in: | Review of Economic Studies Vol. 88; no. 3; pp. 1193 - 1224 |
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| Format: | Article |
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Oxford University Press / USA
May2021
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| Online Access: | View this record in EBSCOhost |
| fields | @attributes: recordID: 1 pdfLink: plink: https://search.ebscohost.com/login.aspx?direct=true&db=ssf&AN=150465056&site=ehost-live header: @attributes: shortDbName: ssf uiTerm: 150465056 longDbName: Social Sciences Full Text (H.W. Wilson) uiTag: AN controlInfo: bkinfo: jinfo: jid: 00346527 REM jtl: Review of Economic Studies issn: 00346527 maglogo: N pubinfo: dt: May2021 vid: 88 iid: 3 pid: 622 pub: Oxford University Press / USA artinfo: ui: 150465056 10.1093/restud/rdaa015 ppf: 1193 ppct: 31 formats: tig: atl: Measuring Ex Ante Welfare in Insurance Markets. aug: au: Hendren, Nathaniel affil: Harvard University su: Massachusetts Insurance Health insurance exchanges Willingness to pay Value capture Cost estimates sug: subj: Insurance Massachusetts Other Insurance Funds All Other Insurance Related Activities Third Party Administration of Insurance and Pension Funds Health insurance exchanges Willingness to pay Value capture Cost estimates ab: The willingness to pay for insurance captures the value of insurance against only the risk that remains when choices are observed. This article develops tools to measure the ex ante expected utility impact of insurance subsidies and mandates when choices are observed after some insurable information is revealed. The approach retains the transparency of using reduced-form willingness to pay and cost curves, but it adds one additional sufficient statistic: the percentage difference in marginal utilities between insured and uninsured. I provide an approach to estimate this additional statistic that uses only the reduced-form willingness to pay curve, combined with a measure of risk aversion. I compare the approach to structural approaches that require fully specifying the choice environment and information sets of individuals. I apply the approach using existing willingness to pay and cost curve estimates from the low-income health insurance exchange in Massachusetts. Ex ante optimal insurance prices are roughly 30% lower than prices that maximize observed market surplus. While mandates reduce market surplus, the results suggest they would actually increase ex ante expected utility. pubtype: Academic Journal doctype: Article src: R language: English refInfo: copyright: @attributes: flag: N holdings: @attributes: islocal: N |
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