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Financial transaction costs reduce benefit take-up evidence from zero-premium health insurance plans in Colorado

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  • Drake, Coleman
  • Anderson, David
  • Cai, Sih-Ting
  • Sacks, Daniel W.

Abstract

With the passage of the American Recovery Plan Act of 2021, roughly 12 million Americans are eligible to purchase zero-premium Health Insurance Marketplace plans. Millions more are eligible for generously subsidized health plans with small, positive premiums. What difference does a premium of zero make, relative to a slightly positive premium? Using a regression discontinuity design and administrative data from Colorado, we find that zero-premium plans increase coverage, primarily by helping low-income households begin coverage sooner. The main mechanism is eliminating the transaction costs of having to make on-time payments to begin coverage. Transaction costs may be a meaningful barrier to subsidized insurance coverage take-up, particularly for low-income families.

Suggested Citation

  • Drake, Coleman & Anderson, David & Cai, Sih-Ting & Sacks, Daniel W., 2023. "Financial transaction costs reduce benefit take-up evidence from zero-premium health insurance plans in Colorado," Journal of Health Economics, Elsevier, vol. 89(C).
    • Handle: RePEc:eee:jhecon:v:89:y:2023:i:c:s0167629623000292
    DOI: 10.1016/j.jhealeco.2023.102752
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    More about this item

    Keywords

    Zero-price effect; Health insurance; Affordable care act; Regression discontinuity;
    All these keywords.

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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