How are Consumers Responding to the ACA Marketplaces?
Friday, Jan. 6, 2017 2:30 PM – 4:30 PM
Hyatt Regency Chicago, Plaza A
- Chair: Jonathan Gruber, Massachusetts Institute of Technology
Information Frictions in Health Insurance Marketplaces: Evidence from a Randomized Field Experiment
AbstractThe Affordable Care Act dramatically expanded the use of regulated marketplaces in health insurance, but information frictions can hamper consumer decision-making in these environments. We conducted a randomized intervention to encourage Affordable Care Act marketplace consumers to shop for plans. We tested the effect of personalized letters and e-mails about the potential savings from switching plans as well as similar, generic messages. The personalized and generic messages both increased website use by 23%; we detect no effects on plan switching. These findings show that simple “nudges” with even generic information can promote shopping in health insurance marketplaces. However, they also leave the impact of the messages on welfare ambiguous, adding to a growing set of nominally effective behavioral interventions with questionable results for downstream outcomes.
Are Low-Income Individuals Aware of and Responsive to Cost-Sharing Subsidies in the Affordable Care Act’s Health Insurance Marketplaces?
AbstractThe 2010 Affordable Care Act (ACA) created Health Insurance Marketplaces that offer affordable health insurance plans. The ACA helps make these plans affordable for low-income consumers by providing both premium subsidies and cost-sharing reductions. Determining whether consumers understand and value cost-sharing subsidies for Marketplace coverage is extremely important. There is major policy concern that individuals who are new to the insurance market lack the financial literacy to successfully navigate the ACA’s complicated provisions and perhaps are erroneously forgoing the subsidies that would otherwise make the purchase of insurance affordable and sensible. Moreover, if the ACA is to enroll a sufficient number of eligible low-income individuals so as to both remain viable and to continue to make a significant improvement in rates of insurance coverage, it is necessary that consumers be aware of the value of subsidies that limit cost-sharing in Marketplace coverage. We use administrative data on the over 19 million health insurance plan choices of individuals who purchased their a health insurance plan in either 2014 or 2015 through the Federal Marketplace in order to assess whether Marketplace consumers behave in a manner than suggests that they are aware of the availability of cost-sharing subsidies. We do this by taking advantage of discontinuous changes in the cost-sharing subsidy schedule and by implementing a sharp regression discontinuity (RD) design. Further, we use the results of this analysis to calculate the price elasticity of demand for the generosity of insurance. We also present evidence on whether consumers are mistakenly forgoing cost-sharing subsidies when selecting plans. Finally, we determine the extent to which the availability of cost-sharing subsidies “crowds-out” the voluntary purchase of more generous plans versus “crowding-in” consumers who would have purchased less generous plans. The results of our RD analysis show that consumers are highly sensitive to the availability of
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