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

Coleman Drake, David Anderson, Sih-Ting Cai and Daniel W. Sacks

Journal of Health Economics, 2023, vol. 89, issue C

Abstract: 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.

Keywords: Zero-price effect; Health insurance; Affordable care act; Regression discontinuity (search for similar items in EconPapers)
JEL-codes: D90 I11 I13 I18 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jhecon:v:89:y:2023:i:c:s0167629623000292

DOI: 10.1016/j.jhealeco.2023.102752

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