Insurance Ratings
In insurance markets, consumers typically observe prices but face substantial uncertainty about plan quality, including network adequacy, customer service, and utilization management. Public ratings systems—such as Medicare Advantage star ratings—are designed to summarize these multidimensional quality attributes and guide consumer choice. Because these ratings are also tied to regulatory and financial incentives, they have the potential to shape both demand and insurer behavior.
The literature on insurance ratings studies how consumers respond to publicly reported plan quality and how insurers adjust plan design, marketing, and coding practices in response to rating thresholds. On the demand side, ratings can reallocate enrollment across plans, affecting market shares and competitive dynamics. On the supply side, ratings may induce strategic responses that improve measured performance without necessarily improving underlying quality. As a result, insurance ratings provide a useful setting for studying the interaction between information disclosure, incentives, and market design.
We introduce this literature by focusing on empirical work that identifies the causal effects of insurance ratings on enrollment and insurer behavior. These papers illustrate how disclosure can amplify or distort incentives when ratings are embedded in regulatory frameworks, and they provide a natural bridge to broader discussions of transparency and competition in health insurance markets.
Potential papers for presentation today include:
- Jin and Sorensen (2006) — a classic analysis of how publicized plan ratings affect consumer choice
- Darden and McCarthy (2015) — evidence on the impact of Medicare Advantage star ratings on enrollment