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Adverse Selection in ACA Exchange Markets: Evidence from Colorado

  • Matthew Panhans
American Economic Journal: Applied Economics
vol. 11, no. 2, April 2019
(pp. 1-36)
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Abstract

This study tests for adverse selection in the Affordable Care Act (ACA) health insurance exchanges established in 2014 and quantifies the welfare consequences. Using a new statewide dataset of medical claims from Colorado, I use plausibly exogenous premium variation generated by geographic discontinuities to test for selection. Specifically, each $1 increase in monthly premiums causes a $0.85–0.95 increase in annual medical expenditures of the insured population in 2014, with attenuated effects in 2015. These estimates are consistent with the prevalence of chronic conditions and difference-in-differences estimates. The results offer the first quasi-experimental evidence of adverse selection in the ACA markets.

Citation

Panhans, Matthew. 2019. "Adverse Selection in ACA Exchange Markets: Evidence from Colorado." American Economic Journal: Applied Economics, 11 (2): 1-36. DOI: 10.1257/app.20170117

Additional Materials

JEL Classification

  • D82 Asymmetric and Private Information; Mechanism Design
  • G22 Insurance; Insurance Companies; Actuarial Studies
  • H51 National Government Expenditures and Health
  • H75 State and Local Government: Health; Education; Welfare; Public Pensions
  • I13 Health Insurance, Public and Private
  • I18 Health: Government Policy; Regulation; Public Health
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