What Are Consumers Willing to Pay for a Broad Network Health Plan?: Evidence from Covered California

I estimate consumer demand for network breadth for health plans in 2017 in California’s State-Based Health Insurance Marketplace, Covered California. Using individual-level enrollment data and provider network directories obtained directly from Covered California, I develop a geospatial measure of network breadth that reflects the physical locations of consumers and nearby in-network providers. I find that consumers are sensitive to both premiums and network breadth in their plan choices. Willingness to pay to switch from a narrow to a broad network plan ranges from 4.71 dollars for households that are younger and have lower incomes, to 55.10 dollars for households that are older and have higher incomes. This difference indicates that a selection mechanism exists in which older, higher-income households sort into broader network plans. High premium sensitivities reduce willingness to pay for network breadth, which may be an unintended consequence of plan standardization in Covered California.