Consumer Decision-Making in the Health Insurance Marketplace

Objectives: Not much is known about consumer decision-making in the state Health Insurance Marketplaces established by the Affordable Care Act (ACA). This dissertation consists of three papers that explore this topic. In Paper 1, I explore how consumers value non-financial plan attributes in their choice of Marketplace plans. In Paper 2, I examine enrollee plan switching decisions in response to changes in the attributes of their chosen plans over time. In Paper 3, I simulate the expected effects of hypothetical minimum network adequacy and plan quality rating requirements on consumer welfare. Methods: The studies utilize discrete choice models on individual-level Marketplace enrollment data from California, Colorado, and Washington. Paper 1 uses conditional and mixed logit models of plan choice to estimate willingness-to-pay (WTP) amounts for key non-financial attributes, notably provider network size and plan quality ratings. Paper 2 uses logit models to explore consumer plan switching decisions as a function of changes in the attributes of chosen plans over time as well as choice set and household-level characteristics. Paper 3 applies the “log-sum” approach to Paper 1’s models to calculate changes in expected consumer welfare under different policy proposals. Results: In Paper 1, I find that consumers are very responsive to network size and plan quality in their choice of Marketplace plans. Individual enrollees exhibit an annual WTP of $200-$300 for a 10 percentage-point (25 percentile) increase in provider network size and a WTP of $1,200-$2,800 for a high quality plan relative to a low quality plan. In Paper 2, I find that changes in the premium, provider network size, and plan quality of chosen plans over time are significantly associated with the probability that enrollees switches plans in the subsequent enrollment period in the expected directions. In Paper 3, I find that minimum network adequacy restrictions may reduce expected consumer welfare, while the welfare effects of plan quality restrictions are more ambiguous. Policy Implications: Policymakers should take consumer responsiveness to provider network size and plan quality into account in their efforts to facilitate consumer decision-making in the Marketplaces. Given the finding that plan quality is highly valued, the implementation of quality ratings in other health exchange settings (such as the Federally Facilitated Marketplace) could be beneficial to enrollees. Moreover, consumer responsiveness to levels and changes in plan quality and network size could inform insurers' decisions to invest in these attributes to attract Marketplace enrollees. Policymakers should also carefully consider the unintended consequences, as well as the balance between plan benefits and affordability, when considering the implementation of requirements related to network adequacy and plan quality ratings