Working Paper: NBER ID: w29869
Authors: Pietro Tebaldi
Abstract: In government-sponsored health insurance, subsidy design affects market outcomes. First, holding premiums fixed, subsidies determine insurance uptake and average cost. Insurers then respond to these changes, adjusting premiums. Combining data from the first four years of the California ACA marketplace with a model of insurance demand, cost, and insurers’ competition, I quantify the impact of alternative subsidy designs on premiums, enrollment, costs, public spending, and consumer surplus. Younger individuals are more price sensitive and cheaper to cover. Increasing subsidies to this group would make all buyers better off, increase market participation, and lower average costs and average subsidies.
Keywords: No keywords provided
JEL Codes: I13; I18; L98
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| subsidy design (H20) | insurance uptake (G52) |
| subsidy design (H20) | average costs (J30) |
| insurance uptake (G52) | premiums adjustment (G52) |
| increasing subsidies for younger individuals (H23) | market participation (L19) |
| increasing subsidies for younger individuals (H23) | lower average costs (D24) |
| adjusting subsidies for younger individuals (H23) | lower premiums for all buyers (G52) |
| insurers' strategic responses to subsidy changes (G52) | pricing conduct (L11) |
| oligopoly pricing (D43) | higher markups (D49) |
| oligopoly pricing (D43) | lower consumer surplus (D11) |
| shifting subsidy generosity (H23) | improvements in market efficiency (G14) |
| shifting subsidy generosity (H23) | improvements in consumer welfare (D18) |