We document that states that experienced website glitches in the ACA's first year faced higher average costs that persisted into future years. These dynamics are inconsistent with the standard strategic-pricing model, which requires non-localized common knowledge about market conditions, but are consistent with price-taking. Initial conditions can have a permanent effect—including convergence to a Pareto-dominated, stable equilibrium—under conditions that we show are plausible in this setting. Changing the fine from a fixed amount to a fraction of equilibrium prices increases the likelihood of reaching a Pareto-efficient equilibrium without increasing the equilibrium fine collected.
Scheuer, Florian, and Kent Smetters.
"How Initial Conditions Can Have Permanent Effects: The Case of the Affordable Care Act."
American Economic Journal: Economic Policy,
National Government Expenditures and Health
State and Local Government: Health; Education; Welfare; Public Pensions
Health Insurance, Public and Private
Health: Government Policy; Regulation; Public Health