CReAM Seminar - Natalia Serna (Stanford)

Abstract: Health insurers typically compete on the breadth of their hospital networks. In this paper I show that insurers' decision to offer network breadth depends on two forces: risk selection and cost incentives. To decompose the relative importance of these forces, I estimate a structural model of insurer competition in networks applied to data from Colombia. I find that insurers risk-select by providing narrow networks in services that unprofitable patients require. Despite selection incentives, some insurers choose to offer broad networks because of heterogeneity in their cost structure. Broad networks can further be promoted by allowing insurers to compete on premiums. Findings suggest that markets with universal coverage can produce broad-network insurers without network adequacy rules and that price and non-price elements of insurance contracts are substitutes for risk selection.

Location: A1/3 Physics Building