Description:

Naoki Aizawa (University of Wisconsin-Madison): Intermediaries and Market Competition in Health Insurance  (joint with Honglin Li, Lorenzo Magnolfi, and Christopher Sullivan)

Abstract: We study how private and public intermediaries affect consumer demand and market competition in a market-based public program. We use administrative enrollment data from California’s health insurance marketplace linked with intermediary identifiers, containing information on individual characteristics, plan choices, and choices of intermediaries. We develop and estimate a model of consumer demand with search frictions where consumers decide whether to use an intermediary and which plan to purchase. Our estimates suggest that private agents steer consumers toward plans with higher commission fees and away from dominant insurers, while public assisters direct consumers toward lower-premium plans. Then, by estimating an equilibrium model with insurer price competition, we find that private-agent steering increases the dispersion of insurer markups, reflecting market power created through intermediary behavior. We then examine how changes in access to public assisters affect equilibrium prices and enrollment, and discuss implications for the design of the size of public intermediaries.