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Demand for Health Insurance Marketplace Plans Was Highly Elastic in 2014-2015

Author

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

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

  • Jean Abraham & Coleman Drake & Daniel W. Sacks & Kosali I. Simon, 2017. "Demand for Health Insurance Marketplace Plans Was Highly Elastic in 2014-2015," NBER Working Papers 23597, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:23597
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    References listed on IDEAS

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    1. Liran Einav & Amy Finkelstein & Mark R. Cullen, 2010. "Estimating Welfare in Insurance Markets Using Variation in Prices," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 125(3), pages 877-921.
    2. Hendrik Schmitz & Nicolas R. Ziebarth, 2017. "Does Price Framing Affect the Consumer Price Sensitivity of Health Plan Choice?," Journal of Human Resources, University of Wisconsin Press, vol. 52(1), pages 88-127.
    3. 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.
    4. David M. Cutler & Sarah J. Reber, 1998. "Paying for Health Insurance: The Trade-Off between Competition and Adverse Selection," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(2), pages 433-466.
    5. Anne Beeson Royalty & Neil Solomon, 1999. "Health Plan Choice: Price Elasticities in a Managed Competition Setting," Journal of Human Resources, University of Wisconsin Press, vol. 34(1), pages 1-41.
    6. Saurabh Bhargava & George Loewenstein & Justin Sydnor, 2015. "Do Individuals Make Sensible Health Insurance Decisions? Evidence from a Menu with Dominated Options," NBER Working Papers 21160, National Bureau of Economic Research, Inc.
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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. 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.
    4. 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.
    5. Maria Polyakova & Stephen P. Ryan, 2019. "Subsidy Targeting with Market Power," NBER Working Papers 26367, National Bureau of Economic Research, Inc.

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    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets

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