Nonparametric Estimates of Demand in the California Health Insurance Exchange

67 Pages Posted: 17 May 2019

See all articles by Pietro Tebaldi

Pietro Tebaldi

University of Chicago - Department of Economics

Alexander Torgovitsky

University of Chicago

Hanbin Yang

Harvard University

Multiple version iconThere are 2 versions of this paper

Date Written: May 2019

Abstract

We estimate the demand for health insurance in the California Affordable Care Act marketplace (Covered California) without using parametric assumptions about the unobserved components of utility. To do this, we develop a computational method for constructing sharp identified sets in a nonparametric discrete choice model. The model allows for endogeneity in prices (premiums) and for the use of instrumental variables to address this endogeneity. We use the method to estimate bounds on the effects of changing premium subsidies on coverage choices, consumer surplus, and government spending. We find that a $10 decrease in monthly premium subsidies would cause between a 1.6% and 7.0% decline in the proportion of low-income adults with coverage. The reduction in total annual consumer surplus would be between $63 and $78 million, while the savings in yearly subsidy outlays would be between $238 and $604 million. Comparable logit models yield price sensitivity estimates towards the lower end of the bounds.

Keywords: healthcare, health insurance, demand, nonparametric estimates

JEL Classification: C14, C3, C5, I13

Suggested Citation

Tebaldi, Pietro and Torgovitsky, Alexander and Yang, Hanbin, Nonparametric Estimates of Demand in the California Health Insurance Exchange (May 2019). University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2019-68. Available at SSRN: https://ssrn.com/abstract=3389880 or http://dx.doi.org/10.2139/ssrn.3389880

Pietro Tebaldi

University of Chicago - Department of Economics ( email )

1126 E. 59th St
Chicago, IL 60637
United States

Alexander Torgovitsky (Contact Author)

University of Chicago ( email )

1101 East 58th Street
Chicago, IL 60637
United States

Hanbin Yang

Harvard University

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