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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

Table A2.

Equilibrium Prices, Sorting, and Welfare with Uniform Pricing (50 cells)

No Reinsurance
Avg Price Diff Avg Bronze Price Avg Platinum Price % in Platinum Change in Welfare
No Risk Adjustment n.a. $1,969 n.a. 0%
Age/sex Risk Adjustment n.a. $1,969 n.a. 0% $0
HHS Risk Adjustment $2,042 $1,978 $4,025 52% $468
Reinsurance
Avg Price Diff Avg Bronze Price Avg Platinum Price % in Platinum Change in Welfare
No Risk Adjustment n.a. $1,969 n.a. 0%
Age/sex Risk Adjustment n.a. $1,969 n.a. 0% $0
HHS Risk Adjustment $938 $2,507 $3,445 81.7% $723

Notes: Table shows equilibrium price differential (price of Platinum – price of Bronze), prices, proportion enrolled in Platinum plan, and change in welfare from no risk adjustment case to case with indicated type of risk adjustment. All simulations use choice model parameters and expected out-of-pocket cost distributions with 50 cells of λi. Bottom panel adds reinsurance where reinsurance reimburses 85% of an individual’s plan costs above $60,000 and is funded with an actuarially fair per capita premium. In all cases, prices vary by age according to the HHS age curve. Equilibrium found using algorithm described in the text. If there is no interior equilibrium, there is no price differential, and only the price of the plan in which the entire market enrolls is shown. Types of risk adjustment include age/sex which uses only demographic variables to predict costs, and HHS which is a concurrent model that uses a different set of diagnosis groups and allows for higher risk scores for Platinum enrollees and a penalty factor for the Platinum plan. Welfare calculated by the certainty equivalent concept discussed in the paper. Case in bold represents the full pricing policy currently being implemented in the Marketplaces.