How does expansion of public health insurance affect risk pools and premiums in the market for private health insurance? Evidence from Medicaid and the Affordable Care Act Marketplaces

Abstract

Private insurance market risk pools are likely to be directly affected by expansions of public insurance, in turn affecting premiums. We investigate the effects of Medicaid expansion on private health insurance markets using data on the plans offered through the health insurance “Marketplaces” (also known as Exchanges) established by the Affordable Care Act. We employ geographic matching to compare premiums for private plans in neighboring counties that straddle expansion and nonexpansion states and find that premiums of Marketplace plans are 11% lower in Medicaid expansion states, controlling for demographic and health characteristics as well as measures of health care access. These results are consistent with evidence on the composition of the private insurance risk pool in expansion versus nonexpansion states and associated differences in expected health spending.