What Does a Public Option Do? Evidence from California

58 Pages Posted: 2 Feb 2023

See all articles by Evan Saltzman

Evan Saltzman

Emory University - Department of Economics

Date Written: February 2, 2023


Creating a public firm to compete with private firms is an increasingly debated intervention to address inefficiency in concentrated markets. I develop a mixed oligopoly model with alternative firm objectives and estimate it with consumer-level data from the California insurance exchange, where one-third of consumers have access to a public firm. In the best-fitting model, the public firm places more weight on consumer surplus than producer surplus. Adding a public firm decreases premiums, improves welfare in concentrated markets, and increases surplus the most for disadvantaged subpopulations. Enhancing subsidies for private plans, a leading alternative intervention, increases premiums and reduces welfare.

Keywords: public option, mixed oligopoly, adverse selection, health insurance, ACA

JEL Classification: I11, I13, L51, L88, H51

Suggested Citation

Saltzman, Evan, What Does a Public Option Do? Evidence from California (February 2, 2023). Available at SSRN: https://ssrn.com/abstract=4346308 or http://dx.doi.org/10.2139/ssrn.4346308

Evan Saltzman (Contact Author)

Emory University - Department of Economics ( email )

1602 Fishburne Drive
Atlanta, GA 30322
United States

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