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Title: Insurance without Commitment: Evidence from the ACA Marketplaces

Citation Type: Working Paper

Publication Year: 2020

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Abstract: We study the dynamics of participation and health care consumption in the Affordable Care Act's health insurance marketplaces. Unlike other health insurance contexts, we find individuals commonly drop coverage midyear-roughly 30% of enrollees exit within nine months of sign-up. While covered, dropouts spend more on health care than in the months before sign-up or after exit. We model the consequences of drop-out on equilibrium premiums and consumer welfare. While dropouts generate a type of adverse selection, the welfare effect from their participation is ambiguous and depends on the relative costs per month of part-year vs. full-year enrollees. In our empirical setting, we find that imposing a penalty that incentivizes participation for at least 3.5 months would lower premium levels and improve overall consumer welfare.

Url: https://web.stanford.edu/~perssonp/ACA_Dropout.pdf

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Authors: Diamond, Rebecca; Dickstein, Michael J; Mcquade, Timothy; Persson, Petra

Series Title: NBER

Publication Number: 24668

Institution: National Bureau of Economic Research

Pages: 1-66

Publisher Location: Cambridge

Data Collections: IPUMS NHGIS

Topics: Population Health and Health Systems

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