Too Much Information: Health Insurance Choice and the Affordable Care Act

Chapter 1
Too Much Information: Health Insurance Choice and the Affordable Care Act
The Patient Protection and Affordable Care Act (ACA) regulates health insurance premium pricing, expands public insurance, subsidizes premiums, and penalizes the uninsured. I analyze how each of these four components affects insurance choice, employment, and welfare by building a general equilibrium life cycle model. Households choose from public and private health insurance options and face idiosyncratic productivity and medical expenditure shocks. To analyze the premium pricing regulation I incorporate a signaling game of asymmetric information. I compare the case where insurers pool households into a single pool, as the ACA requires, and the case where they pool households separately by coverage level. With separate pools, insurers condition premiums on the information about medical expenditure risk revealed by the signal of a household's desired coverage level. I calibrate the model with pre-ACA data from the Medical Expenditure and Panel Survey and find that the model closely matches early post-ACA enrollment data. Only with a single risk pool do consumers choose the highest coverage plans. With separate pools the markets for high coverage plans completely unwind, lowering the welfare gains of the reform. Less information is better. Further counterfactual experiments reveal that while the penalty lowers the uninsured rate, it also lowers average welfare. The premium subsidy increases the number of insured and welfare, but also encourages early retirement.

Chapter 2
The Bills of Health: The Affordable Care Act and Personal Bankruptcy
Medical expenses are one of the leading causes of personal bankruptcy in the United States. This paper analyzes the effect of the Patient Protection and Affordable Care Act (ACA) on the default rate and medical debt of U.S. households using a general equilibrium life cycle model of consumption, savings, and unsecured borrowing. Households face idiosyncratic productivity and medical expenditure shocks and can choose from public and private health insurance options. I calibrate the model with data from the Medical Expenditure Panel Survey, Survey of Consumer Finances, and the Consumer Bankruptcy Project to match aggregate measures of insurance, employment, default, borrowing, and debt. By significantly reducing the number of uninsured households, the ACA reduces the default rate by about a third. The decrease in default probability lowers interest rates and the markup hospitals charge to offset the losses from unpaid bills. These changes reduce the cost of consumption smoothing and the size of out-of-pocket medical expenses, improving the welfare gains of the reform.