Screening in Contract Design: Evidence from the ACA Health Insurance Exchanges.
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ABSTRACT:
SUBMITTER: Geruso M
PROVIDER: S-EPMC8130799 | biostudies-literature | 2019 May
REPOSITORIES: biostudies-literature
Publications
Screening in Contract Design: Evidence from the ACA Health Insurance Exchanges.
Geruso Michael M Layton Timothy T Prinz Daniel D
American economic journal. Economic policy 20190501 2
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 multidime ...[more]
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