"Adverse Selection and Switching Costs in Health Insurance Marketplaces: Using Nudges to Fight the Death Spiral" (Job Market Paper)
In health insurance markets where regulators limit insurers' ability to price on the health status of individuals, a traditional regulatory intervention to protect the market from adverse selection and expand coverage among young and healthy people is mandating insurance coverage. In this paper, I analyze an alternative, behavioral mechanism in the context of the Affordable Care Act Marketplaces: the automatic enrollment of the uninsured with possible opt-out. I build a theoretical model which shows that this nudging policy is welfare improving under inefficiently low coverage rates, and the size of its benefit depends on the strength of consumer inertia. Using an individual-level panel dataset on health insurance plan choice and claims, I estimate a structural model of health insurance demand and supply in the presence of switching costs. Simulating the effects of the policy, I find that auto-enrollment can increase enrollment rates by over 60% and reduce annual premiums by $300. Moreover, I show that taking into account the heterogeneity of preferences is essential when designing default plans for auto-enrolled consumers. Defaulting everyone into the same contract type leads to more quitting due to inefficient matching and it may also indirectly increase adverse selection on the intensive margin through the price adjustment mechanism. The results of this paper suggest that in order to avoid these problems and maximize the welfare gains of auto-enrollment in selection markets, it is important to design smart default policies.
"Moral Hazard in Health Care Utilization and the ACA's Cost Sharing Subsidies"
Cost sharing reduction (CSR) subsidies are a less well-known provision of the Affordable Care Act (ACA) that aimed to make private health insurance coverage more affordable. These subsidies discontinuously increase the share of expenses paid by the insurer as income crosses the eligibility cutoffs. This specific subsidy design provides a unique setting to identify moral hazard in health care utilization from observational data that is a major empirical challenge in the literature. In this paper, I combine individual-level post-subsidy premium data from an All Payer Claims Database with information on plan-level base prices to recover the amount of the premium subsidy. Applying the ACA's premium subsidy formula backwards, I am able to obtain estimates for family income. Using this imputed income, I exploit a sharp regression discontinuity design to study the impact of changes in actuarial value on consumer behavior. I find significant increases in health care spending at income levels associated with the CSR subsidy eligibility cutoffs. These results imply that individuals tend to use more health care services only due to the fact that the insurer becomes responsible for a larger share of their expenditures. These results provide insights about the price elasticity of demand for medical care in a new context.
"Associations Between ACA-related Policies and Clinical Recommendation with HPV Vaccine Initiation" with S. S. Hawkins, J. Cohen, L. E. Pace, C. F. Baum. (submitted)
"The Impact of Policy Changes on HPV Vaccine Completion: A Natural Experiment" with S. S. Hawkins, J. Cohen, L. E. Pace, C. F. Baum. (R&R - Journal of Adolescent Health)
"Trends in BRCA1/2 Testing in Massachusetts among Women with Medicaid versus Private Insurance" with L. E. Pace, C. F. Baum, S. C. Raja, J. Cohen, S. S. Hawkins. (R&R - Medical Care)