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Demand for health insurance marketplace plans was highly elastic in 2014–2015

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Listed:
  • Abraham, Jean
  • Drake, Coleman
  • Sacks, Daniel W.
  • Simon, Kosali

Abstract

A major provision of the Affordable Care Act was the creation of Health Insurance Marketplaces, which began operating for the 2014 plan year. Although enrollment initially grew in these markets, enrollment has fallen recently amid insurer exits and rising premiums. To better understand these markets, we estimate premium elasticity of demand for Marketplace plans, using within-plan premium changes from 2014 to 2015, accounting for state-specific trends and simultaneous changes in generosity. Our preferred estimate implies that a one percent premium increase reduces plan-specific enrollment by 1.7 percent. We argue that this high elasticity reflects the rapid growth and high churn in this market, as well as the high degree of standardization and the availability of many close substitutes.

Suggested Citation

  • Abraham, Jean & Drake, Coleman & Sacks, Daniel W. & Simon, Kosali, 2017. "Demand for health insurance marketplace plans was highly elastic in 2014–2015," Economics Letters, Elsevier, vol. 159(C), pages 69-73.
    • Handle: RePEc:eee:ecolet:v:159:y:2017:i:c:p:69-73
    DOI: 10.1016/j.econlet.2017.07.002
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    References listed on IDEAS

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    1. Claudio Lucarelli & Jeffrey Prince & Kosali Simon, 2012. "The Welfare Impact Of Reducing Choice In Medicare Part D: A Comparison Of Two Regulation Strategies," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(4), pages 1155-1177, November.
    2. Keith M. Marzilli Ericson, 2014. "Consumer Inertia and Firm Pricing in the Medicare Part D Prescription Drug Insurance Exchange," American Economic Journal: Economic Policy, American Economic Association, vol. 6(1), pages 38-64, February.
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    4. Francesco Decarolis & Maria Polyakova & Stephen P. Ryan, 2020. "Subsidy Design in Privately Provided Social Insurance: Lessons from Medicare Part D," Journal of Political Economy, University of Chicago Press, vol. 128(5), pages 1712-1752.
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    8. Ericson, Keith M. Marzilli & Starc, Amanda, 2016. "How product standardization affects choice: Evidence from the Massachusetts Health Insurance Exchange," Journal of Health Economics, Elsevier, vol. 50(C), pages 71-85.
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    Cited by:

    1. Pietro Tebaldi & Alexander Torgovitsky & Hanbin Yang, 2023. "Nonparametric Estimates of Demand in the California Health Insurance Exchange," Econometrica, Econometric Society, vol. 91(1), pages 107-146, January.
    2. Drake, Coleman, 2019. "What are consumers willing to pay for a broad network health plan?: Evidence from covered California," Journal of Health Economics, Elsevier, vol. 65(C), pages 63-77.
    3. Dubey, Jay Dev, 2020. "Income elasticity of demand for health care and it's change over time: Across the income groups and levels of health expenditure in India," Working Papers 20/324, National Institute of Public Finance and Policy.
    4. Maria Polyakova & Stephen P. Ryan, 2019. "Subsidy Targeting with Market Power," NBER Working Papers 26367, National Bureau of Economic Research, Inc.
    5. Saltzman, Evan, 2019. "Demand for health insurance: Evidence from the California and Washington ACA exchanges," Journal of Health Economics, Elsevier, vol. 63(C), pages 197-222.

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