The Relationship Between Medicaid Expansion and Premiums in the Individual Market: A County-Level Analysis
The Patient Protection and Affordable Care Act (ACA) was designed to increase access to affordable health coverage by reforming the individual health insurance market and expanding eligibility for Medicaid, the insurance program targeted towards low-income individuals. Since its passage, however, the ACA has been plagued by criticisms that it has produced significant premium hikes. Moreover, many states chose not to expand their Medicaid programs. I examine whether there is a relationship between Medicaid expansion decisions and insurance premiums in the individual market. Because Medicaid expansions remove lower income individuals from individual insurance markets – and since these individuals tend to have poorer health outcomes – premiums in the private insurance market could be lower in expansion states where the private market is priced for a healthier risk pool. My results indicate that this may not be the case: I find that there is a positive and statistically significant relationship between Medicaid expansion and premiums, although this relationship is small in magnitude. I also find, however, that the relationship is the opposite for states that retained some measure of control over the administration of their marketplaces. This finding makes a novel contribution to the literature by demonstrating how state-level policy decisions can impact the success of national legislation. My study also illustrates the need for additional research into the impact of Medicaid expansions on premiums, as studies conducted to date have found contradicting results.
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