Implications of State Reinsurance Programs For Marketplaces

Steven C. Hill and Paul D. Jacobs

American Journal of Health Economics, 2026, vol. 12, issue 2, 345 - 376

Abstract: Government-subsidized reinsurance can reduce insurers’ exposure to large health claims and can therefore make health insurance more affordable and attract more consumers. By mechanically transferring money from governments to insurers, public reinsurance can reduce premiums, but may also reduce premiums more than dollar-for-dollar if healthier consumers enroll or the insurance market becomes more competitive. We study 12 states that implemented, between 2017 and 2021, reinsurance programs for individual insurance purchased through the Marketplaces created by the Affordable Care Act. Using synthetic event study methods, we examine their impact on the distribution of premiums, the number of insurers, and enrollment. On average, these reinsurance programs decreased premiums by 9 to 19 percent in the first two years of their implementation but had no impact on insurer participation and minimal impact on enrollment in the Marketplaces. Our evidence suggests reinsurance mostly reduced premiums by reducing exposure to claims without more fundamental improvements in the Marketplaces.

Date: 2026
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