Designing and Regulating Health Insurance Exchanges: Lessons from Massachusetts

• Published in: Inquiry (Chicago) Vol. 49; no. 4; pp. 327 - 338
• Main Authors: Ericson, Keith M. Marzilli, Starc, Amanda
• Format: Journal Article
• Language: English
• Published: Los Angeles, CA Excellus Health Plan, Inc 22.12.2012; SAGE Publications; Sage Publications, Inc; SAGE PUBLICATIONS, INC; SAGE Publishing
• Subjects: Adult; Age Factors; Analysis; Bronzes; Choice Behavior; Compensation and benefits; Competition; Consumer Behavior; Consumers; Copayments; Costs and Cost Analysis; Decision Making; Employer provided health insurance; Female; Financing, Personal; Findings from Massachusetts Health Reform: Lessons for Other States; Government Regulation; Health care policy; Health care reform; Health insurance; Health insurance exchanges; Health Insurance Exchanges - organization & administration; Humans; Insurance; Insurance Carriers - statistics & numerical data; Insurance coverage; Insurance deductibles; Insurance markets; Insurance premiums; Insurance providers; Insurance regulation; Laws, regulations and rules; Male; Markets; Massachusetts; Medical service; Middle Aged; Product choice; Regulation; Sex Factors; Standardization; Studies; Taxes; Workers; Massachusetts; United States > US
• ISSN: 0046-9580; 1945-7243
• DOI: 10.5034/inquiryjrnl_49.04.04

The Massachusetts health care reform provides preliminary evidence on the function of health insurance exchanges and individual insurance markets. This paper describes the type of products consumers choose and the dynamics of consumer choice. Evidence shows that choice architecture, including product standardization and the use of heuristics (rules of thumb), affects choice. In addition, while consumers often choose less generous plans in the exchange than in traditional employer-sponsored insurance, there is considerable heterogeneity in consumer demand, as well as some evidence of adverse selection. We examine the role of imperfect competition between insurers, and document the impact of pricing and product regulation on the level and distribution of premiums. Given our extensive choice data, we synthesize the evidence of the Massachusetts exchange to inform the design and regulation on other exchanges.