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The Early Impact of the Affordable Care Act, State by State

Listed author(s):
  • Amanda Kowalski

I examine the impact of state policy decisions on the early impact of the ACA using data through the first half of 2014. I focus on the individual health insurance market, which includes plans purchased through exchanges as well as plans purchased directly from insurers. In this market, at least 13.2 million people were covered in the second quarter of 2014, representing an increase of at least 4.2 million beyond pre-ACA state-level trends. I use data on coverage, premiums, and costs and a model developed by Hackmann, Kolstad, and Kowalski (2013) to calculate changes in selection and markups, which allow me to estimate the welfare impact of the ACA on participants in the individual health insurance market in each state. I then focus on comparisons across groups of states. The estimates from my model imply that market participants in the five "direct enforcement" states that ceded all enforcement of the ACA to the federal government are experiencing welfare losses of approximately $245 per participant on an annualized basis, relative to participants in all other states. They also imply that the impact of setting up a state exchange depends meaningfully on how well it functions. Market participants in the six states that had severe exchange glitches are experiencing welfare losses of approximately $750 per participant on an annualized basis, relative to participants in other states with their own exchanges. Although the national impact of the ACA is likely to change over the course of 2014 as coverage, costs, and premiums evolve, I expect that the differential impacts that we observe across states will persist through the rest of 2014.

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File URL: http://www.brookings.edu/~/media/Projects/BPEA/Fall-2014/Fall2014BPEA_Kowalski.pdf?la=en
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Article provided by Economic Studies Program, The Brookings Institution in its journal Brookings Papers on Economic Activity.

Volume (Year): 45 (2014)
Issue (Month): 2 (Fall) ()
Pages: 277-355

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Handle: RePEc:bin:bpeajo:v:45:y:2014:i:2014-02:p:277-355
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  1. Martin B. Hackmann & Jonathan T. Kolstad & Amanda E. Kowalski, 2015. "Adverse Selection and an Individual Mandate: When Theory Meets Practice," American Economic Review, American Economic Association, vol. 105(3), pages 1030-1066, March.
  2. Liran Einav & Amy Finkelstein & Jonathan Levin, 2010. "Beyond Testing: Empirical Models of Insurance Markets," Annual Review of Economics, Annual Reviews, vol. 2(1), pages 311-336, September.
  3. M. Kate Bundorf & Jonathan Levin & Neale Mahoney, 2012. "Pricing and Welfare in Health Plan Choice," American Economic Review, American Economic Association, vol. 102(7), pages 3214-3248, December.
  4. Michael Rothschild & Joseph Stiglitz, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, Oxford University Press, vol. 90(4), pages 629-649.
  5. Leemore Dafny & Jonathan Gruber & Christopher Ody, 2014. "More Insurers Lower Premiums: Evidence from Initial Pricing in the Health Insurance Marketplaces," NBER Working Papers 20140, National Bureau of Economic Research, Inc.
  6. Kolstad, Jonathan T. & Kowalski, Amanda E., 2016. "Mandate-based health reform and the labor market: Evidence from the Massachusetts reform," Journal of Health Economics, Elsevier, vol. 47(C), pages 81-106.
  7. Pierre-Andre Chiappori & Bernard Salanie, 2000. "Testing for Asymmetric Information in Insurance Markets," Journal of Political Economy, University of Chicago Press, vol. 108(1), pages 56-78, February.
  8. Liran Einav & Amy Finkelstein & Mark R. Cullen, 2010. "Estimating Welfare in Insurance Markets Using Variation in Prices," The Quarterly Journal of Economics, Oxford University Press, vol. 125(3), pages 877-921.
  9. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 84(3), pages 488-500.
  10. Leemore S. Dafny, 2010. "Are Health Insurance Markets Competitive?," American Economic Review, American Economic Association, vol. 100(4), pages 1399-1431, September.
  11. Amitabh Chandra & Jonathan Holmes & Jonathan Skinner, 2013. "Is This Time Different? The Slowdown in Healthcare Spending," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 44(2 (Fall)), pages 261-323.
  12. Keith M. Marzilli Ericson & Amanda Starc, 2015. "Pricing Regulation and Imperfect Competition on the Massachusetts Health Insurance Exchange," The Review of Economics and Statistics, MIT Press, vol. 97(3), pages 667-682, July.
  13. Kowalski Amanda E. & Congdon William J. & Showalter Mark H., 2008. "State Health Insurance Regulations and the Price of High-Deductible Policies," Forum for Health Economics & Policy, De Gruyter, vol. 11(2), pages 1-26, November.
  14. Neale Mahoney, 2012. "Bankruptcy as Implicit Health Insurance," NBER Working Papers 18105, National Bureau of Economic Research, Inc.
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