Ami Ko
Interests: Public Economics, Health Economics, Labor Economics

 

 

 

 

 

Job Market Paper

An Equilibrium Analysis of the Long-Term Care Insurance Market

This paper uses a model of family interactions to explain why the long-term care insurance market has not been growing. Coverage rates are low and premiums have risen sharply in recent years. I develop and estimate a dynamic non-cooperative model of the family in which parents and children interact over long-term care decisions. Competitive equilibrium analyses of the insurance market show that private information about the availability of informal care limits the size of the market by creating substantial adverse selection. In equilibrium, the market only serves high-risk individuals with limited access to informal care. I also find that children strategically reduce informal care in response to their parents' insurance coverage. This family moral hazard effect of insurance reduces the insurance demand and increases the formal care risk of the insured, both of which limit the size of the insurance market. I demonstrate that the initial neglect of adverse selection and family moral hazard resulted in substantial underpricing of insurance products. I further show that the decreasing availability of informal care for more recent birth cohorts puts upward pressure on the equilibrium premium. I propose child demographic-based pricing as an alternative risk adjustment that could decrease the average premium, invigorate the market, and generate welfare gains.

Research

Hospital Price Transparency and Insurer Competition

With cost sharing, a consumer's willingness-to-pay for a health plan is expected to decrease in the plan's negotiated hospital prices. At first glance, an insurance company who succeeded in negotiating very low hospital prices should have an incentive to disclose its negotiated hospital prices to consumers. However, in practice, insurers do not disclose their negotiated hospital prices to consumers. This paper studies theoretically why negotiated hospital prices are not disclosed and investigates empirically the effects of hospital price transparency regulations on insurer competition. I develop a model of insurer competition where insurers face a trade-off in disclosing their negotiated hospital prices. On one hand, informing consumers of low hospital prices is beneficial as it generates higher demand. On the other hand, informing competing insurers of low hospital prices is costly as informed competitors will lower premiums to make their health plans more appealing. When the loss from increased competition outweighs the gain from informing consumers, there is an equilibrium where even the insurer with the lowest hospital prices forgoes disclosure. I empirically test implications of the model using variation in negotiated hospital price transparency regulations across states and insurer-state-year level financial data. I find evidence that transparency regulations reduce premiums and insurer profits, consistent with the model's prediction.

Partial Rating Area Offering in the ACA Marketplace (joint with Hanming Fang)

The Affordable Care Act (ACA) requires that insurers selling plans in the Health Insurance Marketplace vary premiums only by age, smoking status and “rating area” which usually consists of multiple counties. In a given rating area, the ACA mandates uniform pricing for all counties, but, it does not mandate universal offering. We document the prevalence of a phenomenon that we label as partial rating area offering where plans are not sold to all counties within a rating area. Using individual health plans sold in 34 states with federally-facilitated marketplaces, we find that 57 percent of plans are not sold to all counties in a rating area and 63 percent of rating areas have some plans that are not universally offered to all counties. We hypothesize three explanations for this phenomenon: 1) insurers may selectively offer plans to risk screen consumers, 2) insurers may restrict offerings to avoid competition, and 3) insurers may not offer plans in counties where they have relatively narrower provider networks. We develop a simple model of insurer competition that captures these three possibilities and empirically test the model's implications.

Teaching Experience

Head Teaching Assistant
Microeconomics for Managers, Wharton MBA Core (Fall 2015)

Teaching Assistant
Microeconomics for Managers, Wharton MBA Core (Fall 2013, Fall 2014)

Other

Selected Presentations
Center for Retirement Research, Boston College (2016)
American Society of Health Economists Biennial Meetings, Philadelphia (2016)
Econometric Society North American Summer Meetings, Philadelphia (2016)
Social Security Administration RRC Annual Meetings, Washington, D.C. (2016)
Canadian Health Economics Study Group Meetings, University of Toronto (2015)

Honors, Scholarships, and Fellowships
Maloof Family Dissertation Fellowship in Economics, University of Pennsylvania (2016-2017)
Center for Retirement Research Dissertation Fellowship, Boston College (2015-2016)
Doctoral Study Scholarship, Korea Foundation for Advanced Studies (2011-2016)

References

Hanming Fang
hanming.fang@econ.upenn.edu
215-898-7767

Holger Sieg
holgers@econ.upenn.edu
215-898-7194

Petra Todd
ptodd@econ.upenn.edu
215-898-4084

Status

I am on the job market and will be available for interviews during the AEA meetings in Chicago from 1/5 to 1/8