Plans Was Highly Elastic in 2014-2015 Jean Abraham University of - - PowerPoint PPT Presentation

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

Jean Abraham University of Minnesota Coleman Drake University of Minnesota Daniel W. Sacks Indiana University Kosali Simon Indiana University

Introduction

• Individual market as a residual market
• ACA created Health Insurance Marketplaces

– Single portal for all products – Modified community rating – Standardized benefits

• Developing literature regarding consumer

decision making in this market

Research Objectives

• 1. Examine consumer enrollment

decisions with respect to plan characteristics

• 2. Estimate premium elasticity of

demand for Marketplace plans

Literature

• Consumer behavior

– Consumers choose low premiums (Gabel et al. 2017) – Standardization  price sensitivity (Schmitz et al. 2016)

• Switches likely with

– Informational nudges (Ericson et al. 2017) – Premium spikes (ASPE 2017)

• Previous elasticity estimates

– DeLeire and Marks (2015): -2.4 for Silver – Tebaldi (2016): -3 young, low-inc; -1 old, high-inc

Data

Data Source Marketplace Enrollment CCIIO Qualified Health Plan Landscape File Healthcare.gov 2014 Network Data LDI

Objective 1

Examine consumer enrollment decisions with respect to plan characteristics

Annual Premium: Offered & Chosen

1,000 2,000 3,000 4,000 5,000

2014 2015

All Cat. Brz SlvrGoldPlat All Cat. Brz SlvrGoldPlat Offered Chosen

Deductible: Offered & Chosen

2,000 4,000 6,000 8,000

2014 2015

All Cat. Brz SlvrGoldPlat All Cat. Brz SlvrGoldPlat Offered Chosen

Network: Offered & Chosen

10 20 30 40

All Cat. Brz Slvr Gold Plat Offered Chosen

Conclusions: Enrollment

• Consumers select plans with

– Lower premiums – Higher deductibles – Smaller networks

• Implications

– Reduced vulnerability to prem. increases – Higher financial exposure – Decreased network access

Objective 2

Estimate premium elasticity of demand for Marketplace plans

Enrollment-Price Changes

179.4 56.2 29.0

• 11.5

Premium change, 2014 to 2015 Big cut Small cut Small hike Big hike

Estimating Elasticity 1

• Discrete choice logit demand

𝑣𝑗𝑘𝑢 = −𝛽𝑞𝑗𝑘𝑢 + 𝑌

𝑘𝑢𝛾 + 𝜊𝑘𝑢 + 𝜗𝑗𝑘𝑢

𝑣𝑘𝑢 = −𝛽𝑞𝑗𝑘𝑢 + 𝑌

𝑘𝑢𝛾 + 𝜊𝑘𝑢

• Probability of purchasing plan 𝑘

Pr 𝑘 𝑗𝑢 = exp 𝜈𝑘𝑢 σj′∈𝐾𝑢 exp(𝑣𝑘′𝑢)

Estimating Elasticity 2

• Aggregating over enrollees to shares 𝑡

𝑘𝑢

𝑣𝑘𝑢 = log 𝑡

𝑘𝑢

1 − 𝑡

𝑘𝑢

= −𝛽𝑞𝑘𝑢 + 𝑌

𝑘𝑢𝛾 + 𝜊𝑘𝑢

• Estimate differenced version via OLS

Δ log 𝑡

𝑘𝑢

1 − 𝑡

𝑘𝑢

= −𝛽Δ𝑞𝑘𝑢 + Δ𝑌

𝑘𝑢𝛾 + Δ𝜊𝑘𝑢

Elasticity Results

(1) (2) (3) (4) (5) Price Sensitivity

• 1.60

(0.16)

• 1.59

(0.17)

• 1.45

(0.18)

• 1.79

(0.35)

• 1.72

(0.97) Gross Price Elasticity

• 4.90

(0.17)

• 4.89

(0.18)

• 4.46

(0.18)

• 5.50

(0.35)

• 5.27

(0.97) Net Price Elasticity

• 1.83

(0.26)

• 1.83

(0.28)

• 1.67

(0.29)

• 2.06

(0.44)

• 1.97

(1.03) Deductible Control No No Yes Yes Yes Fixed Effect 1 State State State State State Fixed Effect 2 Metal Metal Insurer Metal Fixed Effect 3 Insurer

Conclusions: Elasticity

• FFM consumers very price elastic

– High relative to prev. lit, ESI, MA – Consistent with high inertia

• Why so elastic?

– Standardization (Schmitz et al.) – Close substitutes

Policy Implications

• Marketplace facilitates price competition

– Lower premiums – However, lower profits  Insurer exit

• Deregulation: A race to the bottom?
• Future directions

– What drives elasticity? – Behavior with salient benefit characteristics

Coleman Drake

Division of Health Policy & Management School of Public Health

drake222@umn.edu I am on the job market!