|University of Pennsylvania
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This dissertation aims to develop empirical frameworks to assess a variety of health insurance market policies and explore the optimal policy design taking into account their impacts on the labor market and public insurance program. The first chapter (co-authored with Hanming Fang) presents and empirically implements an equilibrium labor market search model where risk averse workers facing medical expenditure shocks are matched with firms making health insurance coverage decisions. We use our estimated model to evaluate the equilibrium impact of the 2010 Affordable Care Act (ACA) and find that it would reduce the uninsured rate among the workers in our estimation sample from 20.12% to 7.27%. The second chapter evaluates the current health insurance exchange (HIX) system implemented under the ACA and examines its optimal design, accounting for adverse selection and equilibrium labor market interactions. I develop and empirically implement a life cycle equilibrium labor market search model integrated with the pre-ACA health insurance market. Counterfactual experiments show that the ACA decreases not only the uninsured rate but also aggregate labor productivity. Next, I examine the optimal design of HIX by choosing the values of three major design components – tax penalties on the uninsured, premium subsidies and age-based rating regulations. I find that the optimal combination of these components makes it less beneficial for older workers relative to younger workers to purchase health insurance from HIX. Implementing the optimal structure leads to higher labor productivity and a slightly lower uninsured rate. The third chapter (co-authored with You Suk Kim) studies the incentives for private insurers to use advertising to attract low-cost, healthy individuals and the impacts of advertising on selection, competition, and welfare in the context of the Medicare Advantage (MA). We develop and estimate an equilibrium model of the MA market, which incorporates strategic advertising by insurers. We find that advertising has positive effects on overall demand, but a much larger effect on the demand of the healthy individuals. Moreover, we find that advertising accounts for 15% of the selection of healthier individuals into MA. The impact of risk adjustment policies is also examined.