Date of this Version
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.
insurance, health reform, individual mandate, adverse selection
Saltzman, E. (2017). Demand for Health Insurance: Evidence from the California and Washington ACA Marketplaces. Wharton Health Care Management, Retrieved from https://repository.upenn.edu/hcmg_papers/11
Date Posted: 27 November 2017