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Take-Up, Drop-Out, and Spending in ACA Marketplaces

Author

Listed:
  • Diamond, Rebecca

    (Stanford University)

  • Dickstein, Michael J.

    (New York University)

  • McQuade, Timothy James

    (Stanford University)

  • Persson, Petra
Abstract
The Affordable Care Act (ACA) established health insurance marketplaces where consumers can buy individual coverage. Leveraging novel credit card and bank account micro-data, we identify new enrollees in the California marketplace and measure their health spending and premium payments. Following enrollment, we observe dramatic spikes in individuals' health care consumption. We also document widespread attrition, with more than half of all new enrollees dropping coverage before the end of the plan year. Enrollees who drop out re-time health spending to the months of insurance coverage. This drop-out behavior generates a new type of adverse selection: insurers face high costs relative to the premiums collected when they enroll strategic consumers. We show that the pattern of attrition undermines market stability and can drive insurers to exit, even absent differences in enrollees' underlying health risks. Further, using data on plan price increases, we show that insurers largely shift the costs of attrition to non-drop-out enrollees, whose inertia generates low price sensitivity. Our results suggest that campaigns to improve use of social insurance may be more efficient when they jointly target take-up and attrition.

Suggested Citation

  • Diamond, Rebecca & Dickstein, Michael J. & McQuade, Timothy James & Persson, Petra, 2018. "Take-Up, Drop-Out, and Spending in ACA Marketplaces," Research Papers 3680, Stanford University, Graduate School of Business.
    • Handle: RePEc:ecl:stabus:3680
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    File URL: http://www.nber.org/papers/w24668.pdf
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    Cited by:

    1. Lin, Haizhen & Sacks, Daniel W., 2019. "Intertemporal substitution in health care demand: Evidence from the RAND Health Insurance Experiment," Journal of Public Economics, Elsevier, vol. 175(C), pages 29-43.

    More about this item

    JEL classification:

    • H4 - Public Economics - - Publicly Provided Goods
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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