Estimating Welfare in Insurance Markets Using Variation in Prices: Comment
American Economic Journal: Microeconomics, Forthcoming
10 Pages Posted: 26 May 2016 Last revised: 6 Jun 2016
Date Written: June 1, 2015
Einav, Finkelstein and Cullen (2010) find small welfare costs of adverse selection into a premium and out of a baseline health insurance plan offered by an employer. In their model, only the premium plan is required to break even and we argue this drives their conclusion: if the baseline plan were also required to break even, their data, and a wide range of estimates around it, would lead to full collapse of the premium market.
Note: This is a working paper superseded by "Pricing Institutions and the Welfare Cost of Adverse Selection", Forthcoming in the American Economic Journal: Microeconomics and is available as a working paper at http://ssrn.com/abstract=2784563. It is available here for archival purposes as this version contains results left out of the version for publication.
JEL Classification: D41, D82, I13
Suggested Citation: Suggested Citation