Decision-Making Behavior for Health Insurance Firms in the Individual Insurance Market Open Access

Abstract

State-level exchanges created and regulated by the Affordable Care Act provide individual health insurance coverage for over ten million people in the United States. This population and their coverage are not well studied, especially given that they tend to fall between those covered by employer-based insurance and those covered under public insurance. As such, I investigate the motivating factors behind firm decision-making to exit the individual health insurance market. Using linear probability models, I determine the effects of three main independent variables including profit reported and experienced within the last year as well as the effect of competition on the dependent variable of a firm’s exit from the state-level market from 2014 to 2019. I then introduce control variables at the firm level, including the share of plans at each rating level for the firm, total health care utilization for the firm’s covered individuals, and total health care costs for the firm’s covered individuals. Thirdly, I introduce state-level control variables including the socioeconomic status of people living in the state, the proportion of people individually insured int eh state, and the partisan composition of the state. With all these controls, I find that neither profit nor competition are significant predictors of market exit given these control variables. In conclusion, these findings highlight the importance of risk adjustment and insurance firms being involved in multiple markets to ensure viability. This information can inform policy decisions and negotiations between hospitals, physicians, insurers, and consumers by providing a guide to the motivations of the firms as they offer insurance coverage to this under-supported populations. They also provide a need for future study into the unique factors of the individual health insurance market and its population.  

Table of Contents

Introduction

1

Review of Literature

3

Overview of Paper

8

Data and Variables

10

Methodology

13

Results

20

Discussion

24

Conclusion

27

References

30

Appendix of Tables

33

A.     Table 1: Basic LPM Models

33

B.     Table 2a: Firm-Level Controls with Previous Year Reported Profit

34

C.     Table 2b: Firm-Level Controls with Previous Year Experienced Profit

35

D.    Table 3a: State-Level Controls with Previous Year Reported Profit

36

E.     Table 3b: State-Level Controls with Previous Year Experienced Profit

37

F.      Table 4: Aggregate LPM Analysis

38

G.    Table 5: Correlation Coefficients (robustness checks for endogeneity)

39

About this Honors Thesis

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School	Emory College
Department	Economics
Degree	B.A.
Submission	Honors Thesis
Language	English
Research Field	Economics, General Political Science, General
Keyword	Health Insurance Affordable Care Act Health Economics Health Policy Individual Insurance
Committee Chair / Thesis Advisor	Sara Markowitz, Emory University
Committee Members	Evan Saltzman, Emory University Jennifer Sarrett, Emory University

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