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Income Responses to Health Insurance Subsidies: Evidence from Massachusetts

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  • Julie Shi

    (Peking University)

Abstract

This paper analyzes income responses to the eligibility thresholds of health insurance subsidies under the Massachusetts reform, the state-level precursor to the national health-care reform in the United States. Using data from the American Community Survey, I test whether individuals adjusted their income in order to qualify for the subsidies. I find clear evidence of income manipulation around the threshold of 300 percent of federal poverty level (FPL), and some evidence of income manipulation around 150 percent of FPL. The higher threshold determines the eligibility for any insurance subsidy, and the effect is concentrated among wage workers. The lower threshold determines whether the individuals pay zero or positive out-of-pocket premiums, and the effect is concentrated among the self-employed. I also use a structural model to estimate the labor supply elasticity with respect to the wage rate based on the changes of income, and assess the social welfare impacts. The results suggest that the labor supply elasticity is close to zero, and the welfare loss is modest relative to the size of the program.

Suggested Citation

  • Julie Shi, 2016. "Income Responses to Health Insurance Subsidies: Evidence from Massachusetts," American Journal of Health Economics, University of Chicago Press, vol. 2(1), pages 96-124, Winter.
  • Handle: RePEc:ucp:amjhec:v:2:y:2016:i:1:p:96-124
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    Cited by:

    1. Dunn, Abe & Knepper, Matthew & Dauda, Seidu, 2021. "Insurance expansions and hospital utilization: Relabeling and reabling?," Journal of Health Economics, Elsevier, vol. 78(C).
    2. Bradley T. Heim & Ithai Z. Lurie, 2015. "The Impact of Health Reform on Job Mobility: Evidence from Massachusetts," American Journal of Health Economics, University of Chicago Press, vol. 1(3), pages 374-398, Summer.
    3. Lizhong Peng & Xiaohui Guo & Chad D. Meyerhoefer, 2020. "The effects of Medicaid expansion on labor market outcomes: Evidence from border counties," Health Economics, John Wiley & Sons, Ltd., vol. 29(3), pages 245-260, March.
    4. Benjamin R. Handel & Jonathan T. Kolstad, 2021. "The Affordable Care Act After a Decade: Industrial Organization of the Insurance Exchanges," NBER Working Papers 29178, National Bureau of Economic Research, Inc.
    5. Lizhong Peng, 2017. "How Does Medicaid Expansion Affect Premiums in the Health Insurance Marketplaces? New Evidence from Late Adoption in Pennsylvania and Indiana," American Journal of Health Economics, MIT Press, vol. 3(4), pages 550-576, Fall.
    6. Tianxu Chen, 2019. "Health Insurance and Marriage Behavior: Will Marriage Lock Hold Under Healthcare Reform?," Working papers 2019-10, University of Connecticut, Department of Economics.
    7. Heim, Bradley T. & Hunter, Gillian & Isen, Adam & Lurie, Ithai Z. & Ramnath, Shanthi P., 2021. "Income Responses to the Affordable Care Act: Evidence from a Premium Tax Credit Notch," Journal of Health Economics, Elsevier, vol. 76(C).

    More about this item

    Keywords

    health insurance; insurance; Massachusetts reform; subsidy; Affordable Care Act; labor supply; economic costs; welfare loss; income;
    All these keywords.

    JEL classification:

    • I0 - Health, Education, and Welfare - - General
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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