Welfare Implications of the Affordable Care Act
Saturday, Jan. 7, 2017 7:30 PM – 9:30 PM
- Chair: Mark Duggan, Stanford University
Trade-Offs of Simplifying and Subsidizing Complex Choices: Early Evidence From the ACA Exchanges
AbstractUsing new data from the early years of the federally-facilitated Health Insurance Marketplaces (or ACA Exchanges), we explore which factors affect health insurance choices of the non-elderly population targeted by the ACA, and what implications these choices have on subsequent healthcare utilization. A growing literature has documented potential behavioral biases and high cost of decision-making in various insurance settings that rely on consumer choice - from retirement savings to prescription drug plans. A natural conclusion from this literature is that it may be optimal for policy-makers to introduce behavioral nudges (e.g. optimal defaults, framing) that could reduce the behavioral biases or decision-making costs. For example, ACA Exchanges use "metal level" classification of plans as a framing that reduces the complexity of comparisons across dozens of plans on the Exchanges. So far, we have little evidence on how such nudges work in practice, and whether they are strictly welfare-improving or may lead to unintended consequences. In this project we attempt to start closing this gap by exploring whether the metal tier framing and differential subsidization of metal tiers affects choices and subsequent healthcare utilization in the federally facilitated Health Insurance Marketplaces.
Consumption Responses to the Affordable Care Act: Evidence From Credit Card Data
AbstractThis paper analyzes the dynamic consumption responses to the introduction of the Affordable Care Act (ACA). We use novel credit card and bank account microdata on over 8.5 million account holders from certain banks, which offers a detailed view of the consumption decisions of the banked population in the United States -- including at the tails of the income distribution. We first present model-free evidence on the take-up of subsidized health insurance made available through the ACA: We document (i) sharp increases in take-up during the enrollment periods, especially at the lower end of the income distribution; followed by (ii) a continuous drop-out as individuals cease to pay their premiums and lose coverage. We hypothesize that the drop-out is driven by newly insured individuals who, when starting to utilize health care, revise upwards their prior on the actual out-of-pocket costs of care (when covered by health insurance). To investigate these dynamics, we model insured individuals' decision whether to remain insured or drop coverage, allowing for patient learning through the arrival of health (cost) shocks. Our results suggest that patient learning about health care costs is a key driver of the drop-out decision. This emphasizes that efforts to expand coverage of health insurance must go beyond getting individuals to sign up; and in particular, must appropriately manage the insureds' expectations about the costs of care when covered.
- A1 - General Economics