10:45 - 11:45
SQUARE at the University of St.Gallen (Building 11), Guisanstrasse, St. Gallen, Schweiz

The paper “Community Rating and Distortions of Relative Prices in Insurance Menus” investigates the distortionary effects of community rating on relative prices in insurance markets with multiple products. We show that common community-rating approaches may generate counterintuitive distortions in the price differentials between plan options that run in the opposite direction as the distortions in overall price levels. We document that partial age-based community rating leads to this pattern in private health insurance exchanges in the U.S. The distortions are large enough that older individuals often face and sometimes choose dominated options. We discuss the potential effects of alternative menu-based approaches to community rating that would reduce relative price distortions.

Justin Sydnor is the Leslie P. Schultz Professor in Risk Management and Insurance and Professor in the Department of Risk and Insurance at the University of Wisconsin-Madison. He earned his B.A. in economics and German from UW-Madison and his Ph.D. in economics from the University of California, Berkeley. He is a research associate of the National Bureau of Economic Research in Health Care. His research in economics, insurance markets, and risk and decision-making has been published in the American Economic Review, The Quarterly Journal of Economics, Review of Economic Studies, American Economic Journal: Applied Economics, American Economic Journal: Economic Policy, American Economic Journal: Microeconomics, and manyothers. He serves on the editorial board of the American Economic Review, is a senior editor at the Journal of Risk and Insurance, and is an associate editor at the Geneva Risk and Insurance Review.

This research seminar will take place in person. No registration is needed. We look forward to welcoming you there (room Arena: 11-2091).