Impact of Premium Subsidies on the Take-up of Health Insurance: Evidence from the 2009 American Recovery and Reinvestment Act (ARRA)

Asako S. Moriya () and Kosali Simon
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Asako S. Moriya: Center for Financing, Access, and Cost Trends, Agency for Healthcare Research and Quality (AHRQ). This work was done while the corresponding author was a postdoctoral fellow at SPEA, Indiana University
Kosali Simon: School of Public and Environmental Affairs (SPEA), Indiana University, and NBER

American Journal of Health Economics, 2016, vol. 2, issue 3, 318-343

Abstract: We study the coverage impacts of a 65 percent health insurance premium subsidy that targeted employer-insured workers who lost their jobs between September 2008 and May 2010. Our research represents the first econometric analysis of the American Recovery and Reinvestment Act (ARRA) COBRA subsidy and contributes to a better understanding of consumer responses to government-subsidized private health insurance and discussions surrounding Affordable Care Act (ACA) policies. Using data from the Survey of Income and Program Participation (SIPP) and a difference-in-differences estimation strategy, we find that the subsidy is associated with a substantial increase in own-name employer coverage among the targeted group. We estimate a −0.38 to −0.27 price elasticity of demand for health insurance, depending on the specification. This suggests that consumers are somewhat more price sensitive than previously thought, although there are caveats to generalizing from past settings to individuals affected by ACA subsidies. We also find that part of the increase in subsidized coverage was offset by a decrease in unsubsidized non-group insurance.

Keywords: insurance subsidy; price elastic of insurance demand; COBRA (search for similar items in EconPapers)
JEL-codes: I13 J64 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:tpr:amjhec:v:2:y:2016:i:3:p:318-343

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