How do insurance firms respond to financial risk sharing regulations? Evidence from the Affordable Care Act

Abstract Many insurance markets have reinstated premium stabilization programs to ensure financial protection from market volatility. In this paper, we focus on one such regulation—risk corridors (RCs)—in the context of the Health Insurance Marketplaces established under the Affordable Care Act. We develop a model to show how the program provided incentives for some insurers to lower their premiums. The RCs program was defunded unexpectedly for coverage year 2016, before its legislated end in 2016. Consistent with the model, we find that making a RCs claim before the program ended is associated with higher premium growth after the program's demise. The model and empirical evidence ar...

Read the full post at Wiley: Health Economics: Table of Contents
Vote This Post DownVote This Post Up (No Ratings Yet)
Explore the Archive