In 2016 and 2017, programs that paid 12 billion dollars annually to health insurers operating on the individual market in the U.S. were ended. Using variation in exposure to these programs as identification, I find insurers increased premiums approximately dollar-for-dollar in response to their reduced revenue. Among insurers that had a large unexpected reduction in risk corridor payments, 35% went out of business, compared to only 4% of insurers that had similar predictable reductions in reinsurance payments. As a consequence of higher premiums and reduced competition, enrollment in the individual market as a fraction of the population fell by 1% per $1000 reduction in insurer revenues. Reductions in enrollment among high-income individuals were offset by increases in enrollment in employer-sponsored insurance, while uninsurance rates rose for middle-income individuals. Medicaid expansion states, which had a healthier individual market population, had smaller price increases and smaller decreases in individual market enrollment. Since both people and insurance companies can switch to other insurance markets, policies that target any particular insurance market can spill over to affect others.
Selected Work in Progress
Labor Market Effects of Shifts in Employer-Provided Health Insurance Costs among Older Workers, with Kurt Lavetti (draft available upon request)
We study the impact of Medicare eligibility on employment and wages among elderly Americans at firms that offer health insurance. To identify the effect of Medicare eligibility on wages, we use a firm size cutoff that dictates which firms continue paying health insurance costs after employees turn 65. For firms with over 20 employees, the employer health insurance plan acts as the primary payer even if the employee is eligible for Medicare. For firms under 20 workers, Medicare always acts as the primary payer regardless of whether the employer offers health insurance. As a result, firms with over 20 workers that offer health insurance pay substantially more to hire employees aged 65+ than smaller firms. The data we use is a novel linkage between the Utah All-Payer Claims Data and earnings derived from Unemployment Insurance records in Utah from 2013-2019. To our knowledge, this is the first large-scale administrative database available to researchers in the U.S. that combines detailed administrative health records with a matched employer-employee census of jobs. Using a difference-in-differences event study model that controls for fixed worker-firm job match effects, we find that approximately half of the cost savings in small firms are passed through to earnings when workers age into Medicare. We also find that small firms are more likely to hire and retain elderly workers, which leads the fraction of workers employed by small firms to increase by 40% between the ages of 60 and 69.
Insurer Innovation and Health Care Efficiency: Evidence from Utah with Ben Handel, Jon Kolstad, and Kurt Lavetti
We study process innovation by U.S. private health insurers. We aggregate information from more than 4800 natural experiments in which employers force over 34,000 workers to switch health insurance plans to recover the distribution of insurer treatment effects on healthcare spending, prices, quantities, and more granular measures of utilization. We find that insurers do differ in meaningful ways, and insurer assignment explains up to 15% of total medical spending. However, the value of this differentiation is constrained because consumers do not sort into plans on the basis of insurers' comparative advantages and because insurers are ineffective at shifting utilization away from low-value care or towards high-value care. We decompose the effects of insurer assignment on prices into components explained by bargaining, network design, and sorting within networks, finding modest differences in spending effects explained primarily by bargaining and sorting. Our findings raise questions about the value of managed competition by showing that, even in a competitive insurance market with a range of structurally diverse insurers, there is limited evidence that reassigning individuals across insurers has meaningful impacts on the efficiency or composition of health care delivery. Nor are firms able to gain market share when they innovate to lower costs, limiting the returns to innovation and undermining the value of fixed investments in process innovation.
The Incidence of Individual Health Cost Shocks, with Kurt Lavetti and Tamar Oostrom
Real wages have stagnated in recent decades, and a potential cause is rising health costs combined with employer-sponsored health insurance. In this paper, we use linked all-payer claims and earnings data to examine how health cost shocks affect the wages of affected individuals. We also study effects on coworker wages, job separations, and how these outcomes vary by socio-economic factors. Our empirical strategy is a triple difference-in-difference, comparing workers before and after a productivity-neutral health cost shock, compared to coworkers without cost shocks, at firms that do or do not pay for employee health insurance. An example of a health cost shock we use is PrEP medication take-up, which costs about 20 thousand dollars per year and arguably has limited effects on worker productivity. Our preliminary results find little pass-through of health costs into wages, in contrast with earlier work on maternal leave benefits.
Winners and Losers from Risk Pooling in Employer-Sponsored Health Insurance, with Stuart Craig, Kurt Lavetti, Victoria Marone, and Ben Vatter
The Effects of Workplace Social Status on Minority Health Disparities, paper series with Kurt Lavetti, Trevon Logan, and Cynthia Colen
Is This Time Different? The Slowdown in Health Spending with Amitabh Chandra and Jonathan Skinner
Brookings Papers on Economic Activity, Vol 47, No. 2 (2013)
Large Increases In Spending On Postacute Care In Medicare Point To The Potential For Cost Savings In These Settings with Amitabh Chandra and Maurice Dalton
Health Affairs, Vol 32, No. 5 (2013)