Health Care Management Papers

Document Type

Working Paper

Date of this Version


Publication Source

Wharton Health Care Management


I estimate demand for health insurance using consumer-level data from the California and Washington ACA marketplaces. I use the demand estimates to simulate the impact of policies targeting adverse selection, including subsidies and the individual mandate. I find (1) high own-premium elasticities of —6.9 to —7.8, but low insurance coverage elasticities of —0.5 to —0.6; (2) minimal response to the mandate penalty amount, but significant response to the penalty's existence, suggesting consumers have a "taste for compliance"; (3) mandate repeal has minimal effect on consumer surplus because ACA subsidies already mitigate adverse selection by shielding consumers from premium increases; and (4) mandate repeal reduces average annual consumer surplus by up to $1,500 if consumers were exposed to premium increases under voucher-type systems, instead of ACA subsidies. The economic rationale for the mandate depends on the extent of adverse selection and the presence of other policies targeting selection.


This is a working paper, not accepted for publication or review.


insurance, health reform, individual mandate, adverse selection



Date Posted: 27 November 2017