What Are Consumers Willing to Pay for a Broad Network Health Plan?: Evidence from Covered California
52 Pages Posted: 9 Apr 2018 Last revised: 2 Oct 2018
Date Written: October 01, 2018
Health Insurance Marketplaces have received considerable attention for their narrow network health plans. Yet, little is known about consumer tastes for network breadth and how they affect plan selection. I estimate demand for health plans in California’s Marketplace, Covered California. Using 2017 individual enrollment data and provider network directories, I develop a geospatial measure of network breadth that reflects the physical locations of households and in-network providers. I find that households are sensitive to network breath in their plan choices. Mean willingness to pay to switch from a narrow to a broad network plan, defined as a two standard deviation, 17.44 percentage point change in network breadth, is $45.83 in monthly premiums. Variation in WTP indicates that a selection mechanism exists whereby older households sort into broader network plans. I also find that households are highly premium sensitive, which may be a result of plan standardization regulations in Covered California.
Keywords: Health Insurance Marketplace, Covered California, discrete choice, health insurance, provider network
JEL Classification: I11, I13, I18, C21, C25
Suggested Citation: Suggested Citation