UBS Center Seminar
The UBS Center Seminar is an academic seminar series that features presentations from renowned international researchers.
Liran Einav is a professor of economics at Stanford University and a research associate in the National Bureau of Economic Research, where he is directing the Industrial Organization Program. Einav’s areas of specialization are industrial organization and applied microeconomics. An important strand of his work is focused on insurance markets, including the development of empirical models of insurance demand and pricing, and empirical analyses of the implications of adverse selection and moral hazard. Einav has also studied consumer behavior and the pricing of subprime auto loans, competition in the motion picture industry, strategic commitment, and more recently peer-to-peer internet markets and healthcare markets. Einav is a co-editor of Econometrica and serves on the editorial board of several other journals. He received his undergraduate degree in computer science and economics from Tel Aviv University (Israel) in 1997, and his PhD in economics from Harvard University in 2002.
Market Design in Regulated Health Insurance Markets: Risk Adjustment vs. Subsidies
Health insurance is increasingly provided through regulated competition, in which two key market design instruments are subsidies for consumers and risk adjustment for insurers. Although typically analyzed in isolation, we illustrate through a stylized model that subsidies offer two key advantages over risk adjustment in markets with adverse selection: they provide higher flexibility in tailoring insurance premiums to buyers with different willingness to pay and, under imperfect competition, they produce equilibria with lower markups and greater enrollment. We provide a quantitative assessment of these effects using demand and cost estimates from the 2014 California exchange regulated by the Affordable Care Act. There, we estimate that holding government spending constant, subsidies can provide a Pareto improving increase in enrollment of about 6 percentage points, or 13 percent, over risk adjustment alone.
Market Design in Regulated Health Insurance Markets: Risk Adjustment vs. Subsidies by Liran Einav, Amy Finkelstein, and Pietro Tebaldi (July 2018) - download