Health insurance plans often differ in coverage levels and the combinations of cost-sharing attributes to achieve that level. In this paper, I show that the proliferation of plan designs can result from distortion under asymmetric information. Though optimal risk protection requires concentrating coverage in large loss states (i.e., straight-deductible plans), low-risk types signal by sorting into plans with more coverage for smaller losses. Standardizing plans to vary only along a single dimension may exacerbate welfare loss from asymmetric information. Consistent with the model, I show that a large variation in plan designs exists in the ACA federal exchange and that straight-deductible plans attract individuals with significantly higher ex-post medical spending and ex-ante risk scores. I calibrate the potential welfare effects of standardizing plan designs in the ACA when asymmetric information and consumer confusion exist.
Horizontal mergers are often associated with product reshuffling, which may have important anti-trust consequences. This article shows that hospitals merging with local competitors reposition service lines after the merger. We use hospital-level service lists data from American Hospital Association 2002 - 2012. To avoid endogenous selection into mergers, we estimate difference-in-differences models comparing hospitals merged later to those merged earlier. We find that merging hospitals eliminate duplicate services without reducing patient volumes. Hospitals within a system become more differentiated in service positioning after the merger. However, there is limited evidence that repositioning leads to significant cost reductions.
with Justin Sydnor. American Economic Journal: Economic Policy (February 2022)
[Paper] [Online Appendix] [The New York Times Coverage]
with Yu Ding. Journal of Health Economics (December 2021). [PDF]