How do low-income enrollees in the Affordable Care Act marketplaces respond to cost-sharing?

Abstract

The Affordable Care Act requires insurers to offer cost-sharing reductions (CSRs) to low-income consumers on the marketplaces. We link 2013–2015 All-Payer Claims Data to 2004–2013 administrative hospital discharge data from Utah and exploit policy-driven differences in the actuarial value of CSR plans that are solely determined by income. This allows us to examine the effect of cost-sharing on medical spending among low-income individuals. We find that enrollees facing lower levels of cost-sharing have higher levels of healthcare spending, controlling for past healthcare use. We estimate demand elasticities of total health care spending among this low-income population of approximately −0.12, suggesting that demand-side price mechanisms in health insurance design work similarly for low-income and higher-income individuals. We also find that cost-sharing subsidies substantially lower out-of-pocket medical care spending, showing that the CSR program is a key mechanism for making health care affordable to low-income individuals.