Financial Transaction Costs Reduce Benefit Take-Up: Evidence from Zero-Premium Health Plans in Colorado

70 Pages Posted: 29 Jan 2021 Last revised: 22 Oct 2021

See all articles by Coleman Drake

Coleman Drake

University of Pittsburgh Graduate School of Public Health

Sih-Ting Cai

University of Pittsburgh Graduate School of Public Health

David Anderson

Duke-Margolis Center for Health Policy

Daniel W. Sacks

Indiana University - Kelley School of Business - Department of Business Economics & Public Policy

Date Written: October 22, 2021

Abstract

With the passage of the American Recovery Plan Act of 2021, roughly 12 million Americans are eligible to purchase zero-premium Health Insurance Marketplace plans. What difference does a premium of zero make, relative to a slightly positive premium? Using a regression discontinuity design and administrative data from Colorado, we find that zero-premium plans increase coverage substantially, primarily by helping low-income households begin coverage sooner. The main mechanism is eliminating the transaction costs of having to make on-time payments to begin coverage. Transaction costs may be a meaningful barrier to subsidized insurance coverage take-up, particularly for low-income families.

Keywords: Health insurance, Affordable Care Act, zero-price effect, regression discontinuity

JEL Classification: I11, I13, D90, I18

Suggested Citation

Drake, Coleman and Cai, Sih-Ting and Anderson, David and Sacks, Daniel W., Financial Transaction Costs Reduce Benefit Take-Up: Evidence from Zero-Premium Health Plans in Colorado (October 22, 2021). Available at SSRN: https://ssrn.com/abstract=3743009 or http://dx.doi.org/10.2139/ssrn.3743009

Coleman Drake (Contact Author)

University of Pittsburgh Graduate School of Public Health ( email )

135 N Bellefield Ave
Pittsburgh, PA 15260
United States

HOME PAGE: http://https://www.publichealth.pitt.edu/home/directory/coleman-drake

Sih-Ting Cai

University of Pittsburgh Graduate School of Public Health ( email )

135 N Bellefield Ave
Pittsburgh, PA 15260
United States

David Anderson

Duke-Margolis Center for Health Policy ( email )

201 Science Drive
Box 90312
Durham, NC 27708-9985
United States

HOME PAGE: http://https://healthpolicy.duke.edu/people/david-anderson

Daniel W. Sacks

Indiana University - Kelley School of Business - Department of Business Economics & Public Policy ( email )

Bloomington, IN 47405
United States

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