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Demand for Health Insurance Marketplace Plans Was Highly Elastic in 2014-2015

Author

Listed:
  • Jean Abraham
  • Coleman Drake
  • Daniel W. Sacks
  • Kosali I. Simon

Abstract

A major provision of the Affordable Care Act was the creation of Health Insurance Marketplaces, which began operating for the 2014 plan year. Although enrollment initially grew in these markets, enrollment has fallen recently amid insurer exits and rising premiums. To better understand these markets, we estimate premium elasticity of demand for Marketplace plans, using within-plan premium changes from 2014 to 2015, accounting for state-specific trends and simultaneous changes in generosity. Our preferred estimate implies that a one percent premium increase reduces plan-specific enrollment by 1.7 percent. We argue that this high elasticity reflects the rapid growth and high churn in this market, as well as the high degree of standardization and the availability of many close substitutes.

Suggested Citation

  • Jean Abraham & Coleman Drake & Daniel W. Sacks & Kosali I. Simon, 2017. "Demand for Health Insurance Marketplace Plans Was Highly Elastic in 2014-2015," NBER Working Papers 23597, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:23597
    Note: HC HE
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    File URL: http://www.nber.org/papers/w23597.pdf
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    References listed on IDEAS

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    1. 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.
    2. Hendrik Schmitz & Nicolas R. Ziebarth, 2017. "Does Price Framing Affect the Consumer Price Sensitivity of Health Plan Choice?," Journal of Human Resources, University of Wisconsin Press, vol. 52(1), pages 88-127.
    3. Saurabh Bhargava & George Loewenstein & Justin Sydnor, 2015. "Do Individuals Make Sensible Health Insurance Decisions? Evidence from a Menu with Dominated Options," NBER Working Papers 21160, National Bureau of Economic Research, Inc.
    4. Anne Beeson Royalty & Neil Solomon, 1999. "Health Plan Choice: Price Elasticities in a Managed Competition Setting," Journal of Human Resources, University of Wisconsin Press, vol. 34(1), pages 1-41.
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    Cited by:

    1. Pietro Tebaldi & Alexander Torgovitsky & Hanbin Yang, 2019. "Nonparametric Estimates of Demand in the California Health Insurance Exchange," NBER Working Papers 25827, National Bureau of Economic Research, Inc.
    2. repec:eee:jhecon:v:63:y:2019:i:c:p:197-222 is not listed on IDEAS

    More about this item

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets

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