We analyze insurance-pricing regulation under imperfect competition on the Massachusetts health insurance exchange. Differential markups lead to price variation apart from cost variation. Coarse insurer pricing strategies identify consumer demand.Younger consumers are twice as price sensitive as older consumers. Older consumers thus face higher markups over costs. Modified community rating links prices for consumers differing in both costs and preferences, and changes the marginal consumer firms face. Stricter regulations transfer resources from low-cost to high-cost consumers, reduce firm profits, and increase overall consumer surplus.
ASJC Scopus subject areas
- Social Sciences (miscellaneous)
- Economics and Econometrics