Module 1: Health Insurance
The narrow goal of this module is to understand why people buy health insurance (or any insurance really) and how peoples’ private information may influence health insurance prices (e.g., adverse selection). We’ll finish the module with a discussion of current policy issues related to health insurance in the U.S.
The big picture economics concept of this module, or the “airport” idea that I hope you can remember several years later when we run into each other at the airport, is “firms also face uncertainty.” What does that mean? In the context of insurance, it means that insurers really don’t know who will choose their plans (but they definitely try).
Below is a list of readings and other similar resources for this module. Please use the navigation pane to see more details and slides for each part of this module.
Readings and other links
Links to papers are listed alongside the full reference. PDFs of each paper are also available on Canvas.
- Readings for this module:
- Sections 5.1-5.2 and 17.1 of R. Pindyck and D. Rubinfeld, Microeconomics (Upper Saddle River, NJ: Prentice Hall, 2018).
- Chapter 4 of Frank A Sloan and Chee-Ruey Hsieh, Health Economics, MIT Press Books, vol. 1 (The MIT Press, 2012).
- Liran Einav and Amy Finkelstein, “Selection in Insurance Markets: Theory and Empirics in Pictures,” The Journal of Economic Perspectives 25, no. 1 (2011): 115–138. Link to paper here.
- J Michael McWilliams, John Hsu, and Joseph P Newhouse, “New Risk-Adjustment System Was Associated with Reduced Favorable Selection in Medicare Advantage,” Health Affairs 31, no. 12 (2012): 2630–2640. Link to paper here. We’ll discuss this paper at the end of the module.
- Supplemental information we’ll use throughout this module.
- CNN Business, February 2017, “Humana pulls out of Obamacare for 2018”
- Kaiser Family Foundation, February 2017, “High-Risk Pools for Uninsurable Individuals”
- Health Affairs article related to adverse selection, August 2020, “Costs are Higher for Marketplace Members who Enroll during Special Enrollment Periods Compared with Open Enrollment”
- ESPN, January 2019, “A New Threat: An Evaporating Insurance Market”
- NPR, December 2018, “Short-Term Health Plans Boost Profits for Brokers and Insurers.”
- Commonwealth Fund, July 2018, “The Effect of Eliminating the Individual Mandate Penalty.”
- Slides on Insurance Terms
- Slides on Health Insurance Trivia
- Slides on ACA Exchange Pricing
Slides
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