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. Author manuscript; available in PMC: 2018 Dec 1.
Published in final edited form as: J Health Econ. 2017 Dec;56:259–280. doi: 10.1016/j.jhealeco.2017.04.004

Figure A4. Equilibrium Price Differentials and Sorting under Different Types of Risk Adjustment.

Figure A4

Notes: Figure shows equilibrium in setting where sample individuals required to choose between Bronze and Platinum Plans. Light blue line is the demand curve. Orange line represents incremental average cost (IAC) curve with no risk adjustment, blue line represents IAC with demographic risk adjustment, and green line represents IAC with HHS-HCC risk adjustment. Enrollment in Platinum Plan is on x-axis. IAC with no and demographic risk adjustment is everywhere above 45-degree line implying complete market unraveling where everyone enrolls in Bronze plan. Prospective, concurrent, and HHS risk adjustment IACs cross 45-degree line, implying an interior equilibrium exists. Equilibrium is at lowest P where IAC crosses 45-degree line. Concurrent results in the lowest price differential. Equilibrium price and enrollment in Platinum are highlighted by dotted lines. Prices, enrollment, and welfare can be found in Table 4.