Financial transaction costs reduce benefit take-up evidence from zero-premium health insurance plans in Colorado.

With the passage of the American Recovery Plan Act of 2021, roughly 12 million Americans are eligible to purchase zero-premium Health Insurance Marketplace plans. Millions more are eligible for generously subsidized health plans with small, positive premiums. What difference does a premium of zero make, relative to a slightly positive premium? Using a regression discontinuity design and administrative data from Colorado, we find that zero-premium plans increase coverage, primarily by helping low-income households begin coverage sooner. The main mechanism is eliminating the transaction costs of having to make on-time payments to begin coverage. Transaction costs may be a meaningful barrier to subsidized insurance coverage take-up, particularly for low-income families.

How do insurance firms respond to financial risk sharing regulations? Evidence from the Affordable Care Act.

Many insurance markets have reinstated premium stabilization programs to ensure financial protection from market volatility. In this paper, we focus on one such regulation-risk corridors (RCs)-in the context of the Health Insurance Marketplaces established under the Affordable Care Act. We develop a model to show how the program provided incentives for some insurers to lower their premiums. The RCs program was defunded unexpectedly for coverage year 2016, before its legislated end in 2016. Consistent with the model, we find that making a RCs claim before the program ended is associated with higher premium growth after the program's demise. The model and empirical evidence are consistent with the view that the end of the RCs program contributed to premium growth in the Marketplaces.

Same Game, Different Names: Cream-Skimming in the Post-ACA Individual Health Insurance Market.

One of the Affordable Care Act's (ACA) signature reforms was creating centralized Health Insurance Marketplaces to offer comprehensive coverage in the form of comprehensive insurance complying with the ACA's coverage standards. Yet, even after the ACA's implementation, millions of people were covered through noncompliant plans, primarily in the form of continued enrollment in "grandmothered" and "grandfathered" plans that predated ACA's full implementation and were allowed under federal and state regulations. Newly proposed and enacted federal legislation may grow the noncompliant segment in future years, and the employment losses of 2020 may grow reliance on individual market coverage further. These factors make it important to understand how the noncompliant segment affects the compliant segment, including the Marketplaces. We show, first, that the noncompliant segment of the individual insurance market substantially outperformed the compliant segment, charging lower premiums but with vastly lower costs, suggesting that insurers have a strong incentive to enter the noncompliant segment. We show, next, that state's decisions to allow grandmothered plans is associated with stronger financial performance of the noncompliant market, but weaker performance of the compliant segment, as noncompliant plans attract lower-cost enrollees. This finding indicates important linkages between the noncompliant and compliant segments and highlights the role state policy can play in the individual insurance market. Taken together, our results point to substantial cream-skimming, with noncompliant plans enrolling the healthiest enrollees, resulting in higher average claims cost in the compliant segment.

The new stylized facts about income and subjective well-being.

Economists in recent decades have turned their attention to data that asks people how happy or satisfied they are with their lives. Much of the early research concluded that the role of income in determining well-being was limited, and that only income relative to others was related to well-being. In this paper, we review the evidence to assess the importance of absolute and relative income in determining well-being. Our research suggests that absolute income plays a major role in determining well-being and that national comparisons offer little evidence to support theories of relative income. We find that well-being rises with income, whether we compare people in a single country and year, whether we look across countries, or whether we look at economic growth for a given country. Through these comparisons we show that richer people report higher well-being than poorer people; that people in richer countries, on average, experience greater well-being than people in poorer countries; and that economic growth and growth in well-being are clearly related. Moreover, the data show no evidence for a satiation point above which income and well-being are no longer related.