ESSAYS ON ACA MARKETPLACE PLAN PRICING

The dissertation is consisted of two essays on Affordable Care Act Marketplace plan pricing. These two essays are the two chapters of the dissertation respectively.  

First essay studies the effect of Medicaid expansion on ACA Marketplace plan premium. The Affordable Care Act (ACA) aims to mitigate Americans’ uninsured crisis by expanding Medicaid and establishing the ACA Marketplace. The Medicaid expansion has a profound impact on Marketplace plan premiums. On the one hand, it lowers the premiums because the expansion drives out the people with lower income from Marketplace plans, resulting in a pool with a lower risk score for these plans. On the other hand, the Medicaid expansion may shrink the pool size of Marketplace plans, resulting in a riskier pool and a higher Marketplace plan premium. Integrating data from multiple sources, we study how these two competing effects vary across markets with different demographics. We find that the premium-reduction effect is less pronounced in more wealthy markets, while the premium-increase effect is less pronounced in more populous markets. We further find that the Medicaid expansion overall decreased the Marketplace premiums, with more reduction for Silver plans than Bronze plans. We also explore how the Medicaid expansion can lower Marketplace premiums indirectly through the change of the market structure. We finally show the heterogeneity of the net impact of the Medicaid expansion on Marketplace premiums across markets. Our results offer important policy and managerial implications.

The second essay explores the effect of insurer competition on marketplace plan premiums. ACA Marketplace is a new market opportunity for insurers that grant them access to a new group of customers who were not insured before. Previous studies utilize ACA marketplace data and find that additional insurers on the market are associated with a premium decrease in Marketplaces for a benchmark plan. However, the impact of the insurer entry on the premium is not the same for all plans. Using data from 2014 to 2017, we empirically examine the effect of insurer entry on the premium on Marketplace. Our study first confirms the finding that the premium of the second-lowest Silver plans decreases in the number of insurers. We further find evidence of different price trends across plans of different quality levels with additional insurers on the market. When more insurers are on the market, the premium increases for higher-end plans and decreases for lower-end plans. Our analysis shows that intensified competition may exaggerate price discrimination in certain segments while alleviate price discrimination in other markets. The results offer important managerial implications.