Demand for health insurance marketplace plans was highly elastic in 2014–2015

Abstract

A major provision of the Affordable Care Act was the creation of Health Insurance Marketplaces, which began operating for the 2014 plan year. Although enrollment initially grew in these markets, enrollment has fallen recently amid insurer exits and rising premiums. To better understand these markets, we estimate premium elasticity of demand for Marketplace plans, using within-plan premium changes from 2014 to 2015, accounting for state-specific trends and simultaneous changes in generosity. Our preferred estimate implies that a one percent premium increase reduces plan-specific enrollment by 1.7 percent. We argue that this high elasticity reflects the rapid growth and high churn in this market, as well as the high degree of standardization and the availability of many close substitutes.